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95th Congress 1
2d Session j

COlOfflTTEE PRINT

INVESTI
KOREAN-AMERI

REPORT

OF THE

SUBCOMMITTEE ON INTERNATIONAL
ORGANIZATIONS

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

U.S. HOUSE OF REPRESENTATIVES

OCTOBER 31, 1978

Printed for the use of the
Committee on International Relations

^ o*i^ Congress 1 COMMITTEE PRINT

2d Session J

INVESTIGATION OF
KOREAN-AMERICAN RELATIONS

REPORT

OF THE

SUBCOMMITTEE OX INTERXATIOXAIv
ORGAXIZATIOXS

OF THE

COMMITTEE ON

INTERNATIOXAL RELATIONS

U.S. HOUSE OF REPRESENTATIVES

OCTOBER 31. 1978

Printed for the use of the
Committee on International Relations

y.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1978

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington. D.C. 20402

Stock Number 052-070-04729-1

COMMITTEE ON INTERNATIONAL RELATIONS
CLEMENT J. ZABLOCKI, Wisconsin, Chairman

L. H. FOUNTAIN, North Carolina
DANTE B. FASCELL, Florida
CHARLES C. DIGGS, Jr., Michigan
ROBERT N. C. NIX, Pennsylvania
DONALD M. ERASER, Minnesota
BENJAMIN S. ROSENTHAL, New York
LEE H. HAMILTON, Indiana
LESTER L. WOLFF, New York
JONATHAN B. BINGHAM, New York
GUS YATRON, Pennsylvania
MICHAEL HARRINGTON, Massachusetts
LEO J. RYAN, California
CARDISS COLLINS, Illinois
STEPHEN J. SOLARZ, New York
HELEN S. MEYNER, New Jersey
DON BONKER, Washington
GERRY E. STUDDS, Massachusetts
ANDY IRELAND, Florida
DONALD J. PEASE, Ohio
ANTHONY C. BEILENSON, California
WYCHE FOWLER, Jr., Georgia
E (KIKA) DE LA GARZA, Texas
GEORGE E. DANIELSON, California
JOHN J. CAVANAUGH, Nebraska

WILLIAM S. BROOMFIELD, Michigan
EDWARD J. DERWINSKI, Illinois
PAUL FINDLEY, Illinois
JOHN H. BUCHANAN, Jr., Alabama
J. HERBERT BURKE, Florida
CHARLES W. WHALEN, Jr., Ohio
LARRY WINN, Jr., Kansas
BENJAMIN A. OILMAN, New York
TENNYSON GUYER, Ohio
ROBERT J. LAGOMARSINO, California
WILLIAM F. GOODLING, Pennsylvania
SHIRLEY N. PETTIS, California

John J. Brady, Jr., Chief of Staff

Investigation of Korean-American Relations by the Subcommittee on
International Organizations

DONALD M. ERASER, Minnesota, Chairman

MICHAEL HARRINGTON, Massachusetts
BENJAMIN S. ROSENTHAL, New York
LEE H. HAMILTON, Indiana
LEO J. RYAN, California

EDWARD J. DERWINSKI, Illinois
WILLIAM F. GOODLING, Pennsylvania

Robert B. Boettcher, Subcommittee Staff Director

Michael J. Hershman, Deputy Staff Director

Lawrence B. Sulc, Minority Staff Consultant

Howard T. Anderson, Investigator

Edward J. Baker III, Investigator

Steven M. Blush, Investigator

Gordon L. Freedman, Jr., Investigator

Edwin H. Gragert, Investigator

Kathleen Kadane, Investigator

Martin J. Lewin, Investigator

Robert W. Mueller, Minority Staff Consultant

Fred J. Rayano, Investigator

William J. Garveunk, Research Coordinator

Beverley C. Lumpkin, Investigator and Administrative Officer

Ruth L. Good, Research Analyst

David P. Hauck, Research Analyst

Susan G. Slotnick, Research Analyst

Sharon M. Willcox, Research Assistant

Carol J. Cavaney, Staff Assistant

Shea Harris, Staff Assistant

(ID

FOREWORD

House of Representatives,
Committee on International Relations,
Washington, RC, October SI 1978.
This report has been submitted to the Committee on Internation-
al Relations by the Chairman of the Subcommittee on Internation-
al Organizations pursuant to a Committee Resolution adopted on
February 3, 1977, and amended on February 2, 1978.

The findings, conclusions, and recommendations in this report
are those of a majority of members of the Subcommittee on Inter-
national Organizations and do not necessarily reflect the views of
the membership of the full Committee on International Relations.

Clement J. Zablocki,
Chairman.

(Ill)

Digitized by the Internet Archive
in 2013

http://archive.org/details/investigationofkOOunit

LETTER OF TRANSMITTAL

House of Representatives,
Committee on International Relations,

Washington, D.C., October 31, 1978.
Hon. Clement J. Zablocki,

Chairman, Committee on International Relations,
U.S. House of Representatives, Washington, D.C.

Dear Mr. Chairman: On behalf of the Subcommittee on Interna-
tional Organizations, I am submitting for consideration by the
Committee on International Relations the report of the Investiga-
tion of Korean-American Relations, together with additional views
by the minority. It contains the findings, conclusions, and recom-
mendations of the subcommittee with respect to the nature of
Korean-American relations and various allegations of questionable
activity in the conduct of the relationship.

The report is a reflection of diligent work by an outstanding staff
of 20 persons. Throughout the investigation, they showed careful
consideration of both the positive and the problematic elements in
Korean-American relations.

This inquiry provided valuable insights into the evolution of
relations between two close allies and what contributed to the
problems which have disturbed their relations in recent years. The
subcommittee believes that the study has applicability to relations
between the United States and other countries. It is also the hope
of the subcommittee that ultimately its report will contribute to a
partnership based on mutual trust for the benefit of the people of
both the United States and the Republic of Korea.

Donald M. Fraser,
Chairman, Subcommittee on

International Organizations.

(V)

CONTENTS

Page

Part A: Introduction and Summary 1

Introduction 3

Security and political affairs 3

Intelligence activities and plans 5

Executive branch awareness of questionable Korean activities 5

Economic relations 7

Educational, information cultural activities 8

Commentary 9

Part B: Review of Korean-American Relations 11

Introduction 13

The postwar years: 1945-61 14

Establishment of the Republic of Korea and the Democratic People's

Republic of Korea 15

The Korean war 15

Post-Korean war years: 1953-60 16

Fall of the Rhee government 17

Militant government: 1961-63 18

1961 military coup 18

Relations with the United States 20

Establishment of the KCIA 22

Origin of the Democratic Republican Party 23

President Park's first term 25

Normalization of relations with Japan 25

1967 elections 27

The emergence of the Moon Organization 28

President Park's second term 29

Third-term amendment 31

Development of the Korean economy 32

Reduction of U.S. Forces in Korea 33

Korean efforts to coordinate influence activities 33

1971 elections and Korean domestic unrest 35

North-South dialog 37

Korea under the Yushln constitution 38

Reaction to Yushin abroad 41

Harassment and kidnaping of Kim Dae Jung 42

Tongsun Park and the U.S. Embassy 43

Korean question at the United Nations 43

The oil crisis 44

The Nidecker incidents 44

Moon demonstration for the KCIA 44

Congress cuts military aid 45

The scandal breaks 46

Part C: Investigative Findings 49

I. Security and political affairs 51

The djmamics of the region 51

Role of U.S. forces in South Korea 52

Factors in modem Korean-American relations 53

The Vietnam war 53

Blue House raid 54

Capture of the U.S.S. Pueblo 55

Vance mission 57

(vn)

Part C: Investigative Findings — Continued

I. Security and political tiffairs— Continued

Factors in modem Korean-American relations — Continued Page

The Honolulu meeting 57

The EC-121 incident 58

The Guam doctrine 58

Nixon-Park meeting 60

1970-71 troop reduction 61

Implementation of NSDM 48 63

Korea unsure of congressional mood 64

Honolulu Defense Ministers Conference 65

The Agnew visit 66

Covert planning to influence U.S. policy 67

The modernization program in Congress 69

Carter troop reduction 71

Imp£u;t of congressional investigations 72

The Carter plan 72

Defense industries in Korea 74

Conclusions 74

Special issues: ROK defense production and military self-suffi-
ciency 76

Korean defense plant and production capability 76

Arms export 81

Conclusions and recommendations 87

n. Intelligence activities and plans 89

Introduction 89

Responsibilities of KCIA officers stationed in the United States 90

Harassment and intimidation 93

Influence activities 96

The KCIA's plans for clandestine operations 96

Kim Sang Keun's testimony 97

KCIA use of "outsiders" 101

Written KCIA plans 102

Docimients relating to Tongsun Park's activities 102

Annual KCIA plans 105

1976 KCIA Plan for Operations in the United States 106

Implementation of the 1976 plan 108

Additional factors affecting KCIA influence activities 110

KCIA reaction to the Korean scandal/conclusion 112

m. Executive branch awareness of questionable Korean activities 114

Executive branch responsibilities 114

Executive branch reporting 116

Early influence efforts 117

AID-ROK Government attempts to control influence efforts 124

U.S. attempts to counter Korean influence efforts 129

Continuing Korean Government influence efforts 146

The Justice Department's bribery investigation 152

Conclusion 153

Recommendations concerning intelligence activities and plans
emd executive brcinch awareness of questionable Korean ac-
tivities 157

IV. Economic relations 158

Introduction 158

The Korean economy: 1945-61 159

Korean-American economic relations: 1961-63 161

U.S. assistance in the 1960's 162

AID goals: 1961-63 164

AID/ROK relations: 1961-63 165

Korean-American economic relations: 1964-69 166

Korean implementation of the stabilization pn^am 167

1965: A crucial year in Korean-American relations 168

The Second Five-Year Plan: 1967 169

aid's continued impact on stabilization 170

Part C: Investigative Findings— Continued
IV. Economic relations — Continued

Korean- American economic relations: 1964-69 — Continued Page

The role of other countries and international organizations . 171

Military assistance and the economy in the 1960's 172

Military assistance program 173

Korean troops in Vietnam 174

The Korean economy by 1969 177

Special problems in Korean economic development in the 1960's 179

Korean-American economic relations in the 1970's 181

Introduction 181

The Third and Fourth Five-Year Plans 182

Rural and urban programs 184

General economic slowdown: 1972 185

The balance of payments problems 185

Request for U.S. assistance 187

U.S. reaction to the Korean request 188

Further ROK response: The August emergency meas-
ures 190

1971 textile agreement 191

The oil crisis: 1974-75 196

U.S. evaluation and recommendation 197

Korean requests for additional U.S. assistance 198

Korean-American trade 200

U.S. efforts to liberalize Korea's import policy 201

U.S. restrictions on Korean experts 202

Generalized system of preferences 203

Military assistance in the 1970*8 203

Conclusion 205

Special issues relating to economic relations 207

Food-for-peace program 207

Public Law 480 and the Defense Department 209

Public Law 480 and the White House 210

Public Law 480 and the Korean Government 210

Others interested in Public Law 480 210

Conclusions and recommendations 214

Military procurement problems in Korea 215

U.S. procurement system 216

Koream measures to control procurement 217

The U.S. response 219

U.S. procurement systems changes 221

Positive results 222

Conclusions 223

Problems of political funding and U.S. trade and investment in

Korea 225

Historical background 226

The investigation 240

The KI questionnaires 240

Political payments 240

Kickback and rebating arrangements with Korean pur-
chasers 248

Questionable payments 250

Responses of the U.S. Government to political payments .... 252

Conclusion 255

Recommendations 258

V. Educational, informational, and cultural activities 259

ROK Government information organizations 259

Attempts to influence the U.S. academic community 262

Grants to U.S. academic institutions 263

University of Hawaii 265

Western Michigan University 266

Harvard University 269

Columbia University 274

University of California at Berkeley 279

University of Washington 280

American University 283

University of Southern California 284

Part C: Investigative Findings— Continued

V. Educational, informational, and cultural activities — Continued Page

Approaches to U.S. scholars and research institutes 284

U.S. scholars 285

Research institutes 289

Hudson Institute 289

Research Institute on Korean Affairs 290

Use of academic conferences 293

Activities involving Korean students in the United States 295

Conclusions and recommendations 296

Information 300

Efforts to influence news media 300

Government control of the media within Korea 300

Attempts to influence Korean media in the United States .. 301

Efforts to influence U.S. media 305

Voice of America 305

Foreign press censorship and harassment in Korea 308

Other attempts to influence U.S. media 310

Conclusion 311

The Moon Organization 311

Introduction 311

Use of the term "Moon Organization" 313

Goals of Moon 313

Components of the Moon Organization 316

Unification Church 316

International Federation for Victory over Communism

and Freedom Leadership Foundation 319

International Cultural Foundation 321

Unification Church International 322

Korean Cultural and Freedom Foundation 323

Business enterprises 325

Issues revealed by the investigation 332

Cohesiveness of the Moon Organization 332

Interchangeability among organizations, person-
nel, and funds 334

Political activities by the Moon Organization 338

Activities in support of Nixon 340

Anti-Japanese demonstration 343

Moon Organization participation in election cam-
paigns 345

Activities at the United Nations 346

Moon use of prominent Americans 348

Activities of the Korean American Political Associ-
ation 348

Ties with the ROK Government, agencies, and officials . 351

Early relations with the Korean Gk)vemment 353

Relations with the Park Government 354

Moon Organization and ROK Government use and

control of the KCFF 355

Moon Organization and ROK Government use of

Little Angels 359

Moon Organization control of the KCFF governing

board 361

KCFF ties with ROK Government officials 362

Moon Organization and the South Korean defense

industry 366

Other ties to the ROK Government 369

Economic activities 372

Businesses 372

Financial transactions 373

Sources of funds 373

Use of funds 373

Part C: Investigative Findings — Continued

V. Educational, informational, and cultural activities — Continued
The Moon Organization — Continued

Issues reveaded by the investigation — Continued

Economic activities — Continued Page

Diplomat National Bank 376

Sources of DNB funds 378

Use of the Diplomat National Bank 381

Tongsun Park and the Diplomat National

Bank 384

Summary 385

Conclusions and recommendations 387

Executive branch task force 390

VI. International agreements between the United States and the Repub-
lic of Korea 393

VII. Immigration and Naturalization Service issues 396

Section 13(c) cases 396

Case No. 1: Lee Jai Hyon 396

Case No. 2: Hyohk Hoon Han 397

Case No. 3: Sung-Han Kim 397

Two additional cases 397

The section 13(c) problem 398

Involvement of the Subcommittee on International Organiza-
tions 400

Status acquired through personal wealth and other factors 400

Political asylum cases 402

Conclusions and recommendations 404

Part D: Special Problems in the Conduct of the Investigation 405

I. Attitude of the Korean Government 407

n. The Japanese attitude toward the investigation 410

in. Intransigence of the Moon Organization 411

rV. House rules and procedures 414

Travel 414

Quorums 414

Need for 1-member deposition authority 415

Sworn statements 415

Subpena power 415

Subpena enforcement and contempt power 415

Costs for reproducing documents 416

V. Difficulty of tracing financial transactions 417

VI. Special problems with Tongsun Park, Kim Hyung Wook, and Kim Ki

Wan 421

Tongsun Park 421

Kim Hyung Wook 422

Kim Ki Wan 424

Part E: Activities of Influence by Foreign Governments 427

Legal lobbying 429

Illegal influencing 430

Registration of foreign agents 431

Conclusions 432

Part F: Additional Views 435

Part G: Glossary 441

I. Organizations and terms 443

II. Names 444

PREFACE

The report of the Investigation of Korean-American Relations is
organized into six parts as follows:

Part A: Introduction and Summary. — Outlines the origin of the
investigation and the major findings, with page references to the
main body of the text where further details may be found.

Part B: Review of Korean-American Relations. — Describes briefly
the history of Korean-American relations from 1945 on, as back-
ground to the events of the 1970's which led to the investigation.
Certain of the findings of the investigation are incorporated in the
review so that the reader may see their historic context.

Part C: Investigative Findings, Conclusions, and Recommenda-
tions.— Details the subjects investigated, the findings of the investi-
gation, and the subcommittee's analysis, conclusions, and recom-
mendations. This part contains seven sections. The first five (Secu-
rity and Political Affairs; Intelligence Activities and Plans; Execu-
tive Branch Awareness of Questionable Korean Activities; Eco-
nomic Relations; and Educational, Informational, and Cultural Ac-
tivities) reflect the major subjects specified in the investigation's
mandate. The final two sections (International Agreements be-
tween the United States and the Republic of Korea and Immigration
and Naturalization Service Issues) deal with matters related to the
mandated subjects which the subcommittee believed warranted sep-
arate mention.

Part D: Special Problems in the Conduct of the Investigation. —
Discusses six factors which affected the process or outcome of the
investigation (Attitude of the Korean Government; The Japanese
Attitude Toward the Investigation; Intransigence of the Moon Or-
ganization; House Rules and Procedures; Difficulty of Tracing Fi-
nancial Transactions; and Special Problems with Tongsun Park,
Kim Hyung Wook, and Kim Ki Wan.) In some cases, the subcom-
mittee made recommendations that it believed would facilitate
future investigations by the Congress.

Part E: Activities of Influence by Foreign Governments. — Address-
es the general concept of lobbying by foreign governments and
other attempts to influence the United States in favor of their
policies, and considers which activities are acceptable or legal,
improper or illegal. The Department of State submitted a state-
ment to the subcommittee on this subject, which is included.

Part F: Additional Views by the Minority. — States additional
views by the minority.

Part G: Glossary. — Contains brief descriptions of persons and
organizations.

Published in a separate volume are the appendixes. Appendix A
provides a more complete description of the origin and conduct of

(XIII)

XIV

the investigation, including short biographies of the investigative
staff. Appendix B contains the authorizing and funding resolutions
for the investigation. Appendix B consists of a number of the
documents cited in the text.

Also available, but published separately from this final report
and appendixes, are the transcripts of subcommittee hearings and
documents submitted for the record. A list of these and other key
congressional reports is contained in appendix C*

Several matters concerning the content of the final report should
be noted.

Confidentiality of sources. — The findings were derived from ex-
tensive review of documents and numerous interviews. Much of the
material was classified; many of the persons interviewed requested
anonymity. Where the subcommittee was unable to cite a specific
source for the reason, the footnote reads "classified material** or
"subcommittee staff interview." In most instances, information was
verified by other sources so that it has been possible to provide at
least one specific reference.

Korean names. — For the most part, Korean names have been
romanized according to the spelling used by the person. Korean
custom is to put the family name first, with given names following.
The subcommittee followed this practice except in the cases of well-
known persons such as Tongsun Park, Sun Mjoing Moon, and
Hancho Kim, where the order is reversed to the usual English
order.

Documents in Korean. — A number of the documents reviewed by
the subcommittee were in the Korean language. They were trans-
lated either by staff investigators Edward J. Baker and Edwin H.
Gragert or other experts.

The subcommittee extends special thanks to the following execu-
tive branch agencies for their valuable cooperation: the Securities
and Exchange Commission, the Department of State, the Agency
for International Development, and the Department of Agriculture.
The subcommittee noted separately its appreciation of the exten-
sive help it received from elements of the intelligence community.
Also, the subcommittee is deeply grateful to the hundreds of pri-
vate individuals whose voluntary assistance was of crucial impor-
tance.

» Because of the numerous references to subcommittee hearings and certain other key congres-
sional reports, their full citations have been abbreviated after the first reference. Abbreviations
are noted at the first reference.

PART A

INTRODUCTION AND SUMMARY

Introduction

The Subcommittee on International Organizations was author-
ized by the Committee on International Relations on February 3,
1977, to "conduct a full and complete investigation and study
of * * * all aspects of the political, military, intelligence, economic,
educational, and informational relationships, between the Republic
of Korea and * * * the United States." '

The subcommittee first took an active interest in Korean-Ameri-
can relations in response to reports of systematic violations of
international human rights standards in South Korea by the Gov-
ernment of President Park Chung Hee. During a hearing on that
subject on June 10, 1975, a former senior Korean diplomat, Lee Jai
Hyon, testified that the KCIA had a plan to buy support for the
South Korean Government and counter criticism of President
Park's policies in the United States.^ When the Department of
Justice took no active interest in investigating Dr. Lee's allega-
tions, the subcommittee undertook a small-scale inquiry of its own
throughout 1976. There appeared to be strong indications of im-
proper or illegal Korean Government activities in the United
States, so the subcommittee sought and obtained authorization for
the Investigation of Korean-American Relations.

The findings of the investigation are the result of 3 years of
study by the subcommittee. The subcommittee necessarily relied
very heavily on the investigative staff for developing the informa-
tion. Between April 4, 1977, and October 31, 1978, 1,563 interviews
were conducted in 28 States and 11 countries; 123 subpenas were
issued; thousands of documents were examined from Government
agencies, private organizations, and individuals; and 20 hearings
were held at which 37 witnesses testified, all under oath. Complete
findings, conclusions, and recommendations appear between pages
49 and 404. The following points are a summary of the findings,
with page numbers locating the detailed supporting narrative in
the report.

Security and Political Affairs

(1) The Government of the Republic of Korea (ROK) resorted to
extraordinary measures to influence American policy and opinion
for two reasons:

(a) The Government perceived a waning of the U.S. commitment
to defend South Korea. In 1968, it regarded as too weak the Ameri-
can responses to the North Korean commando raid on the Blue

* Resolution by the Committee on International Relations instructing the Subcommittee on
International Organizations to inquire into certain matters respecting relations between the
United States and the Republic of Korea, Feb. 3, 1977. For full text of the resolution see
appendix A.

* "Human Rights in South Korea and the Philippines: Implications for U.S. Policy," hearings
before the Subcommittee on International Organizations of the Committee on International
Relations, 94th Cong., Ist sess., May 20, 22, and June 3, 5, 10, 12, 17, and 24, 1975, pp. 179-183.

(3)

35-508 O - 78 - 2

House, the Presidential Mansion, and capture of the U.S.S. Pueblo.
More importantly, it was alarmed over the withdrawal of 20,000
U.S. troops from Korea and was uncertain that Congress would
appropriate funds for the $1.5 billion compensatory aid package
offered by the Nixon administration for modernizing the ROK
Armed Forces [pp. 67-71].

ib) After President Park Chung Hee instituted measures of strict
internal and political control in 1972, the image of the South
Korean Government was damaged in the United States.

(2) The initial objectives of South Korea's influence operations
were to insure congressional approval of the $1.5 billion military
aid package between 1971 and 1975 and to prevent further with-
drawal of U.S. troops. From 1972 onward, there was another impor-
tant objective — to convince Americans that Park's new system of
government was justified for reasons of national security and eco-
nomic development [pp. 70-71].

(3) In the fall of 1970, meetings were held in the Blue House,
some attended by President Park, to discuss centralizing and co-
ordinating activities in the United States designed to influence
American policy and officials in favor of South Korean policies. At
the first meeting, a plan was proposed for putting Tongsun Park at
the head of all ROK lobbying in the United States. Those to be
placed under Tongsun Park's control were: Lee Sang Ho, also
known as Yang Doo Won, KCIA representative in Washington;
Kang Young Hoon of the Research Institute on Korean Affairs;
and Pak Bo Hi of the Korean Cultural and Freedom Foundation.
The plan to put Tongsun Park in charge was abandoned because of
factional rivalries and President Park's desire to maintain central-
ized control through regular official channels. A special Blue
House review panel was established for the latter purpose. Howev-
er, it was unable to centralize the activities due to the tangle of
Koreans involved in lobbying in Washington for reasons of both
patriotism and personal profit [pp. 124-125].

(4) Government officials in Seoul with responsibilities for Wash-
ington lobbying included Prime Minister Chung II Kwon, KCIA
Director Lee Hu Rak, and Presidential aide Park Chong Kyu. The
separate lobbying operations sometimes competed with each other.
Generally, they sought to use parliamentarians, scholars, business-
men, and other persons of potential influence. There were frequent
paid trips to Korea. In Washington, Tongsun Park's George Town
Club, established with KCIA assistance, became a lobbying center
for the Korean Government [p. 125ff].

(5) In Seoul in 1974, Presidential aide Park Chong Kjru had an
envelope containing $10,000 delivered to John Nidecker, an aide to
President Nixon. U.S. Ambassador Philip Habib returned the
money at Nidecker's request. A few months later, Nidecker re-
ceived from Korean National Assemblyman Row Chin Hwan an
offer for congressional election campaign contributions to candi-
dates to be chosen by the White House. Nidecker declined [pp.
150-151].

(6) By 1975, the Korean Government judged Tongsun Park's use-
fulness to be declining as a result of publicity alleging ties between
Park and the Government. Accordingly, Hancho Kim, a Baltimore
businessman, was chosen to replace Park as a lobbjdst [p. 151].

(7) The South Korean Government desired to export weapons
made in Korea under U.S. license. Between 1974 and 1978, requests
were made to the State Department for permission to export to 11
countries; most were not approved. Between 1976 and 1978, Tong-
sun Park negotiated unsuccessfully with an American arms pro-
ducer for a joint venture to export ROK-produced weapons which
required U.S. Government approval [pp. 82-83; 85-86].

Intelligence Activities and Plans

(1) Consistent with President Park's support for influence activi-
ties in the United States, the KCIA devised plans — both written
and unwritten — for operations, including:

(a) Recruitment of Americans to advocate South Korea's policies,
especially Members of Congress, academicians, journalists, busi-
nessmen, and clergymen;

(6) Visits to Korea by influential Americans;

(c) Countering of criticism of the Park Government among Kore-
ans living in the United States, partly by infiltrating the Korean
community with undercover agents;

id) Use of commissions from U.S.-financed rice sales for KCIA
activities;

(e) Prevention and countering of North Korean activities in the
United States; and

if) Obtaining U.S. Government classified information by cultivat-
ing officials [pp. 96-108].

(2) The KCIA sought to increase its manpower by using other
than regular KCIA officials. Persons used because of their special
contacts included: Tongsun Park, who was acquainted with Mem-
bers of Congress and other Government officials; Pak Bo Hi, a key
figure in the Moon Organization; Kang Young Hoon, who had ties
to academia through his research institute; Suzi Park Thomson,
who was employed in Speaker Carl Albert's office; and Kim
Kwang, who was employed in Congressman Cornelius Gallagher's
office. In 1973, the senior officers of the Embassy were assigned
tasks for the KCIA plan. The 1976 KCIA plan identified 65 persons
in the United States as targets for influencing [pp. 93-96; 99-101;
109].

(3) As a result of publicity about the Korean scandal and the
defection of KCIA officer Kim Sang Keun, the KCIA drastically
reduced its personnel and activities in the United States in late
1976 and early 1977 [pp. 112-113].

(4) The U.S. intelligence community filed reports on KCIA plans
and activities from the outset of the influence campaign and dis-
seminated the information to appropriate agencies of the executive
branch [pp. 116-117].

Executive Branch Awareness of Questionable Korean

Activities

(1) By 1971, appropriate agencies of the executive branch had
sufficient knowledge of questionable Korean Government activities
in this country to warrant taking action toward halting the activi-
ties and preventing recurrences. Instead, the activities were al-

lowed to continue until a major scandal erupted 5 years later [p.
153].

(2) Failure to take effective action may be attributed to an atti-
tude of permissiveness toward South Korea on the part of high
executive branch officials. The attitude was a reflection of the
overriding priorities in U.S. policy toward South Korea in the early
1970's: to keep Korean troops engaged in the war in Vietnam; to
accomplish troop reductions in South Korea, with minimum conse-
quences for Korean-American relations; and to maintain credibility
for the U.S. position in Korea as an unyielding commitment to
resist the threat of Communist aggression [p. 155].

(3) Two executive branch agencies attempted to take action
against questionable Korean activities, but they proved unsuccess-
ful. In 1971, the Department of State requested that the FBI inves-
tigate Radio of Free Asia (a project of the Moon Organization),
Tongsun Park's activities, and other Korean matters in order to
determine if the Foreign Agents Registration Act had been violat-
ed. The FBI concluded that there had been no violations after
questioning only one person, Pak Bo Hi, an official of the Moon
Organization. In 1968 and 1972, the Department of Agriculture
asked other executive branch agencies for information on Tongsun
Park in order to determine if he had ties to the Korean Govern-
ment which would have made him ineligible to serve as a selling
agent for food-for-peace rice sales and ineligible for the millions of
dollars in commissions he had received. The responses to Agricul-
ture's inquiry indicated no relationship between Tongsun Park and
the South Korean Government [pp. 121-122; 129ff].

(4) In 1971 and 1972, FBI Director J. Edgar Hoover sent letters to
Dr. Henry Kissinger at the White House and Attorney General
John Mitchell containing the following information:

(a) A Congressman and his aide were cooperating with the KCIA,
and the Congressman had received ''payoffs" for assisting the
Korean Government before a House committee.

(6) Two named aides to Congressmen were then connected with
the KCIA;

(c) Tongsun Park had made contributions to a named Congress-
man from money received in rice sales, and Park was acting under
KCIA direction, although not a KCIA employee;

id) The South Korean Government had spent large sums to de-
velop control over journalists in the United States;

(e) The Blue House directed that several hundred thousand dol-
lars be contributed to the Democratic Party; and

if) A named Congressman, who had sought campaign contribu-
tions from President Park, told President Park that Tongsun Park
should not only be put in charge of influence activities in the
United States, but should also be the agent for Korean rice pur-
chases from the United States [pp. 130-134; 140].

Kissinger recalled having seen "the letter that speaks about the
alleged bribery of one Congressman who was later indicted." ^
Mitchell recalled seeing the information about the congressional

' "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess., part
IV, Mar. 15, 16, 21, 22; Apr. 11, 20; and June 20, 1978 (hereinafter referred to as "KI-4"), p. 242.

aides being connected with the KCIA.* Kissinger and Mitchell
noted that the letters also stated that the intelligence agency pro-
viding the information had requested no investigative action be
taken due to the high sensitivity of the intelligence information
[pp. 140-142].

(5) The Department of State became concerned in 1973 about
KCIA instigation of harassment of Koreans living in the United
States, the most serious example of which was the physical disrup-
tion of a rally in San Francisco for Korean opposition politician
Kim Dae Jung. As a result, the Department requested that KCIA
station chief Lee Sang Ho be transferred from the United States
since he was regarded as the person most responsible for the har-
assment. However, harassment continued after Lee's departure [pp.
147-149].

(6) In 1975, certain intelligence information came to the attention
of Philip Habib, then Assistant Secretary of State for East Asian
and Pacific Affairs. The information implied extralegal attempts to
influence key Americans, especially Members of Congress, and con-
gressional offices. Habib showed the information to Secretary of
State Kissinger, who subsequently consulted with President Ford.
The President directed that the information be transmitted to the
Department of Justice for action, resulting in a full-scale investiga-
tion beginning in 1976 [pp. 151-153].

Economic Relations

(1) The rapid transformation of the South Korean economy is one
of the world s greatest examples of economic development. Between
1961 and 1977, the annual rate of growth averaged more than 9
percent. The achievement is a tribute to the industriousness of the
Korean people, effective implementation of planning by the Gov-
ernment, and cooperation between the United States and the Re-
public of Korea.

(2) U.S. assistance played an indispensable role in Korean eco-
nomic development. In the late 1950 s, the economy depended on
U.S. assistance for survival. In the 1960's, military assistance freed
South Korea from the burden of heavy defense spending. Five-year
plans were formulated and carried out with American advice, and
development projects were funded through AID.

(3) Korean participation in the Vietnam war brought approxi-
mately $1 billion worth of benefits to the economy.

(4) Assistance under the food-for-peace program (Public Law 480)
helped fill food needs and provided budgetary support but may
have functioned as a disincentive to agricultural development. By
1970, when the economy was sufficiently developed to phaise out
Public Law 480, the program was abused by maintaining high
levels of assistance for nondevelopmental purposes, thus undermin-
ing its legislative intent. This resulted from: The Defense Depart-
ment's desire to continue supporting the Korean defense budget;
the White House's desire to restrict textile imports from Korea; the
Korean Government's desire to hold down the price of rice paid by
politically restive workers; Congressmen Passman's and Hanna's
desire to sell their States' surplus rice; and the desire for rice

* KI-4. p. 144.

commissions on the part of Tongsun Park, the South Korean ruling
party, and the KCIA, the latter for its activities in the United
States.

(5) The Korean Government negated the competitive bidding
practices of the U.S. Government by keeping contracts for U.S.
military procurement artificially high, at a cost of millions of dol-
lars to the U.S. Treasury. American efforts to control the abuse of
military procurement contracting apparently succeeded in 1976
with the establishment of a new system called Controlled Selected
Single Source Procurem_ent.

(6) At least $8.5 million of American corporate funds were divert-
ed to the ruling party in connection with the 1971 elections in
Korea. The practice of obtaining payments from American business
was widespread in the 1960's and, though diminished, continued
into the 1970's [p. 241].

(7) American support for Korean economic self-sufficiency laid
the groundwork for conflicts between the two countries. In trade
relations. South Korea's successful export economy has become a
matter of concern with regard to potential effects on the U.S.
economy.

Educational, Informational, and Cultural Activities

(1) In 1970, a Korean Government official attempted to bribe an
official of the Voice of America, apparently for the purpose of
limiting unfavorable news about the Government [p. 307].

(2) The KCIA established and funded Korean-American newspa-
pers and broadcasting in the United States for the purpose of
improving the Government's image. Publishers of critical newspa-
pers were subjected to KCIA harassment and intimidation, includ-
ing advertising boycotts and threats to relatives in Korea [p. 30 Iff].

(3) The ROK Government established the Research Institute on
Korean Affairs in Silver Spring, Md. for the purpose of extending
pro-Korean Government influence within the American academic
community. Total funding from the KCIA and other agencies of the
Government amounted to $270,000 [pp. 289-293].

(4) The Korean Government made financial grants, or directed
that grants be made, to at least four American universities for the
purpose of funding Korean studies programs. The total amount
made available was $2.4 million. The universities accepted the
grants without conditions limiting academic freedom, despite
Korean attempts to influence the use of the funds for political
purposes [pp. 263-284].

(5) The numerous political, business, cultural, and religious activ-
ities associated with Rev. Sun Myung Moon constitute one organi-
zation, designated by the subcommittee as the "Moon Organiza-
tion" [p. 313].

(a) Sun Myung Moon exercises substantial control over his orga-
nization and has defined its goals, one of which is the establish-
ment of a worldwide government controlled by Moon and his fol-
lowers in which the separation of church and state would be abol-
ished. Among the components of the Moon Organization in the
United States are the Unification Church, the Korean Cultural and
Freedom Foundation, News World (a New York newspaper), the

Freedom Leadership Foundation, and fishing and seafood business-
es in Alabama, Massachusetts, and Virginia [pp. 316-332].

(6) In pursuit of its own goals, the Moon Organization at various
times has submitted to the control of, and has coordinated its
activities with, the Korean Government [pp. 338-355].

(c) At the behest of the KCIA, the Moon Organization planned
and organized an anti-Japanese political demonstration in Wash-
ington in 1974. On orders from the KCIA, the demonstration was
called off just before it was to have begun [pp. 343-345].

(d) Tong II Industries Co., a Korean component of the Moon
Organization which manufactures parts for the M-16 rifle for the
Korean Government, negotiated with the American patent holder
for permission to export Korean-made M-16 rifles, apparently
acting on behalf of the Korean Government [p. 83 ].

(e) Pak Bo Hi, an official of the Moon Organization, acted as a
conduit for a KCIA payment of $3,000 to a Japanese Unification
Church member [pp. 369-370].

if) The Moon Organization directly provided at least $1,218,000 to
purchase stock in the Diplomat National Bank of Washington,
approximately 50 percent of the bank's total capitalization. This
investment, an apparent violation of banking laws, was consistent
with Moon's stated goal to ''establish an international bank" to
keep currency ''freely coming back and forth." Pak Bo Hi testified
that at least $838,000 of the total investment came from the "Unifi-
cation Church Pension Fund International." The subcommittee
found no supporting evidence that such a fund ever existed. (Tong-
sun Park also purchased $250,000 of stock in the bank, in apparent
violation of securities law. He acknowledged that his intention was
"to own" the bank eventually. The subcommittee found no evi-
dence of collusion between Tongsun Park and the Moon Organiza-
tion in the purchase of bank stock.) [pp. 378-381]

Commentary

The South Korean influence campaign caused a setback in
Korean-American relations by engendering distrust between the
two nations. The campaign was born in over reaction and died in
counterproductivity for Korea. U.S. troop levels in Korea and the
ultimate approval by Congress of the $1.5 billion in aid for military
modernization appeared not to have been affected materially by all
the money, effort, and risk invested by the Park Government. The
other objective of the influence campaign — to convince Americans
that Park's authoritarian government was justified — clearly was
not achieved. Two Presidents of the United States expressed criti-
cism of Park's internal political policies, and in the only instance
when Congress reduced military assistance funding specifically for
South Korea, the reason was violations of human rights.

South Korean leaders were mistaken if they believed that in the
long run, Americans would tolerate conduct such as bribing offi-
cials, buying influence among journalists and professors, extorting
money from American companies, rigging military procurement
contracts, and harassing persons in the United States. On the other
hand, the U.S. Government did little to discourage such conduct.
The executive branch offered a military aid package to compensate

for lowering the level of U.S. forces in Korea, but emphasized that
since Congress is an independent branch of the Government, actual
funding of the aid program could not be guaranteed. The Koreans
decided to take their case directly to Congress. When executive
branch officials became aware of highly questionable approaches to
Congress, their inaction served as tacit encouragement to the Kore-
ans, and the influence campaign gained momentum. Similarly, the
only measure to deal with widespread harassment and intimidation
of Korean-Americans was the State Department's expulsion of one
KCIA official, and the harassment continued. With respect to pay-
ments to Korean politicians by American businesses, the U.S. Em-
bassy's limited interest and knowledge led businessmen to conclude
that they could not expect much help from their Government. In
view of the dominant influence the United States has exercised in
Korea, the U.S. Government must bear some responsibility for the
effects of its own inactions, as well as its actions.

The Korean influence campaign can serve as a case study for
relations with other countries generally regarded as friendly.
Korea surely is not the only such country to have engaged in
improper and illegal activities in the United States, although the
subcommittee did not investigate relations with other countries.
The openness of the American system leaves institutions vulner-
able to penetration and possible manipulation by foreign influence.
In the Korean case, the system failed because of permissiveness,
bureaucratic shortcomings, and the low priority given to monitor-
ing the activities of non-Communist governments. The Department
of State never drew a clear line as to what kinds of activities were
unacceptable. In reply to a request by the subcommittee, the De-
partment declined to state guidelines setting forth the acceptable
limits of lobbying activities by foreign governments. The FBI's
capacity to monitor the influence activities of non-Communist gov-
ernments remains negligible, and apparently enforcement of the
Foreign Agents Registration Act is still accorded low priority in the
Department of Justice. Indications of activities by other govern-
ments similar to those in the Korean case necessitate more atten-
tion by the U.S. Government in the future.

The relationship between the United States and the Republic of
Korea is the story of a successful friendship leading to conflicts.
The frequent reaffirmations of traditional friendship and close alli-
ance sometimes created mistaken expectations that the two coun-
tries would always support each other's policies. In fact, as South
Korea became increasingly self-sufficient, divergencies between
American and Korean policies have become wider. Economic
strength has made South Korea a formidable competitor in certain
sectors of the U.S. economy. Military strength and diminishing
U.S. ground troop presence are leading South Korea to become a
sizable arms manufacturer interested in exporting weaponry and
developing its own nuclear arms capability. Military and economic
strength together have made President Park less and less receptive
to American encouragement of democratic government. The hope
for the future is that the conflicts of today and tomorrow will give
way over time to the kind of mature relationships the United
States enjoys with the industrial democracies.

PART B

REVIEW OF KOREAN-AMERICAN RELATIONS

This historical review covers the period from 1945, when Ameri-
can occupation forces arrived in Korea, to the end of 1976, when
the Korean influence scandal became widely known. Some of the
findings of the Investigation of Korean-American Relations appear
chronologically along with previously known facts.

Introduction

The Korean people have one of the world's longest histories as a
unified people with a homogeneous language and culture. Korea
has existed for over 1,000 years as a distinct nation with a strong
tradition of national identity. The 33-year division between north
and south is an artificial phenomenon to Koreans, and its origin is
political rather than ethnic, linguistic, or cultural.

As is frequently noted, Korea's strategic geopolitical location
places it in a precarious position. Korea borders China and the
Soviet Union to the north and lies within sight of the Japanese
islands, 50 miles east across the Straits of Korea. All too often, the
interests of larger nations in Northeast Asia have been fought out
on the Korean Peninsula. In modern history, three major wars
have taken place there — in 1894, 1904, and 1950.

Korea's first official diplomatic relations with a Western nation
came in 1882. At that time, the United States established relations
and maintained a full diplomatic presence in Korea through 1905.
In that year, Korea became a protectorate of Japan, and the U.S.
Legation was reduced to the status of a consulate. The chauige was
based upon an agreement by which Japan recognized American
interests in the Philippines and the United States recognized Japa-
nese interests in Korea. Japan annexed Korea in 1910.

Japanese rule in Korea was characterized by economic exploita-
tion, sharp discrimination against Koreans, and occasional brutal
suppression of displays of Korean nationalism. During the war in
China and the Pacific from the late 1930's through 1945, a futile
attempt was made to assimilate Koreans forcibly by outlawing the
use and study of the Korean language and denying the existence of
Korean culture. Most Koreans were forced to adopt Japanese
names; Korean laborers were taken to Japan to work in nonstrate-
gic industries; and Koreans were subject to conscription into the
Japanese Army. The objective of economic development was to
provide the Japanese Empire with food, raw materials, and mar-
kets for Japanese goods.

As brutal as the colonial experience was, there were some posi-
tive elements in the long run. Efficient systems of transportation
and communications were established, still in use today. Basic
industries were established, mostly in the north where the bulk of
raw materials and hydroelectric power were found. The southern
region was the peninsula's granary and commercial center, comple-
menting the industrial north. Another legacy of the colonisd period
was the emergence of some skilled labor and a small but well-
trained white-collar managerial class. Postv/ar Korea was able to
capitalize on those skills.

(13)

The Postwar Years: 1945-61

Liberation from Japanese rule came on August 15, 1945, with the
Japanese surrender to the Allied Forces ending the Second World
War. Before the war ended, the decision to divide the Korean
Peninsula at the 38th parallel was made in the Pentagon and
proposed to the Soviet Union as a means of joint U.S.-U.S.S.R.
acceptance of Japanese surrender on the Korean Peninsula.^ This
temporary division became permanent as cold war thinking came
to dominate the policies of the World War II Allies in the immedi-
ate postwar period.

Economically, the immediate postwar years in the southern
region of Korea were harsh. Its economy, long dependent on Japan
and dismembered by the division of the country, was in shambles.
Liberation had resulted in an influx of millions of Koreans from
China, Japan, and the U.S.S.R. who had been dislocated during the
36 years of colonial rule. Most returned to their hometowns in
southern Korea, the area traditionally most densely populated and
from which most Koreans had emigrated in prewar years.

The economic depression was exacerbated by the failure of the
U.S. military government to effect meaningful nationwide land
reform, control the extremely high rate of inflation, or stimulate
agricultural and industrial production. U.S. economic assistance
took the form of relief, consisting principally of food and basic
necessities. Further, because the military government failed to
settle disputes over formerly Japanese-owned commercial, industri-
al, and agricultural assets, much of the preexisting economic base
was underused.

Politically, too, there were problems. Most Korean leaders at
that time faced a severe credibility crisis. Many had collaborated
with the Japanese colonial government, even prospering under it.
Many of those who did have good nationalist records were consid-
ered to be leftwing. The American military government, estab-
lished shortly after the troops arrived in the fall of 1945, chose to
avoid such persons in favor of leaders of a more conservative bent.
One such individual was Syngman Rhee. Rhee was brought back to
Korea in late 1945 from the United States, where he had been
living in exile during Japanese rule. The U.S. military government
saw Rhee as a potential leader, one who could provide stability to
an area ripe with political unrest. The United States was particu-
larly concerned with halting in Korea what was perceived to be
Soviet expansion in Asia. In the view of the U.S. military govern-
ment, this could best be accomplished through the establishment of
a viable non-Communist state in the southern half of the
peninsula.

On November 14, 1947, the United Nations approved a U.S.
resolution calling for general elections, to be held throughout the
Korean Peninsula the following year, under the supervision of the
U.N. Temporary Commission on Korea. Since U.N. officials were
denied access to areas north of the 38th parallel, the U.S. military
government decided to hold elections in the area under its control.

* Truman, Harry S, Memoirs by Harry 8 Truman: Year of Decisions (Garden City, N.J.
Doubleday, 1955), vol. I, pp. 444-445.

Many Koreans boycotted these elections on the grounds that they
might perpetuate the division of the Korean Peninsula.

ESTABLISHMENT OF THE REPUBLIC OF KOREA AND THE DEMOCRATIC
PEOPLE'S REPUBLIC OF KOREA

Elections for a National Assembly were held south of the 38th
parallel on May 10, 1948. In July, Syngman Rhee was elected
President of the Republic of Korea (ROK) by a vote of the National
Assembly. The ROK was officially established on August 15, the
anniversary of liberation from Japanese colonial rule.

In October 1948, the Democratic People's Republic of Korea
(DPRK) was established in the northern half of the peninsula
under Kim II Sung, a former anti-Japanese guerrilla fighter and
former officer in the Soviet Army, who had accompanied the Soviet
troops into Korea in 1945. Kim was still the head of state of the
DPRK in 1978.

Both the ROK and the DPRK maintained that they were the
only legitimate government of the entire Korean Peninsula. This
resulted in sharp competition between the two governments for
international recognition over the past 30 years.

During the late 1940's, there were scattered incidents of unrest
in South Korea caused by dissatisfaction over the economic situa-
tion and against the politicad leaders held responsible for it. One
such incident occurred in the area of Yosu in southwest Korea in
October 1948. Military personnel there staged a brief leftwing up-
rising. One of them was a colonel named Park Chung Hee. The
uprising was put down within 1 week after considerable loss of life.
Park's participation in this incident was to create a problem in
Korean-American relations in the days following the coup which
brought him to power in 1961.

Most American troops were withdrawn in May and June of 1949.
At approximately the same time, all U.S.S.R. forces were with-
drawn from DPRK.

THE KOREAN WAR

The outbreak of the Korean war on June 25, 1950, was perceived
by Washington to be part of a worldwide pattern of expansion by
Communist forces, the most recent example of which had been Mao
Tse Tung's victory in China in 1949.

On January 12, 1950, Secretary of State Dean Acheson had
stated that the American defense perimeter extended south from
Japan through the Ryukyu Islands, thus excluding the ROK. Some
historiams and many Koreans have believed that North Korea per-
ceived this statement to mean the United States would not inter-
vene in a war on the Korean Peninsula.*

At the time of the outbreak of the w£ir, the United States and
the ROK had no security treaty insuring U.S. military intervention
in case of attack. The U.S. Government therefore took the issue to
the United Nations Security Council and, in the absence of the
U.S.S.R. delegate, obtained sanction for and assistance in providing
military aid and troops to the ROK. A United Nations Command
(UNO was established at the recommendation of the Security

* Kim, Se-Jin, Documents on Korean-American Relations, 1943-76 (Seoul, Korea: Research
Center for Peace and Unification, 1976), pp. 83-89.

Council in June 1950 and assumed operational control over all
military activity on the peninsula. In the beginning, the UNC was
placed under the command of the Commander-in-Chief of the U.S.
8th Army in Korea, and that was still the situation in 1978.

The Korean war was brutal and devastating for both north and
south. Large areas of each, including their capitals, Pyongyang and
Seoul, were occupied by the opposing forces, resulting in heavy
damage to most major cities and transportation and communica-
tions systems. Large numbers of civilians were dislocated as they
fled the fighting. The Korean war also brought many ROK military
leaders to the United States for training, forging personal bonds
with American military personnel and the United States generally.

The Korean war officially ended on July 27, 1953, with the
signing of an armistice by representatives of the United States, the
DPRK, and the People's Republic of China (PRO, the culmination
of 2 years of difficult truce negotiations. President Rhee was per-
suaded to accept the truce (although he would not sign it) only
after the United States agreed to a U.S.-ROK mutual defense
treaty, a visit by the U.S. Secretary of State, and a pledge of $1
billion for reconstruction. As of 1978, the ROK still had not signed
the armistice.

POST-KOREAN WAR YEARS: 1953-60

Throughout his administration, Rhee attempted to centralize and
consolidate his political power by intimidating the opposition
through the use of police force and rightwing student groups and
by subverting the legislative process. Rhee was at somewhat of a
disadvantage vis-a-vis political opponents because he lacked a natu-
ral constituency in Korea. Having been out of Korea for much of
his life, he had no ties to any particular region of the country.
Educated in the United States, Rhee also had none of the close
personal relationships normally formed among Koreans during stu-
dent years. Throughout the 1950's, Rhee was faced with a faction-
ridden but still formidable opposition from politicians both within
and outside the National Assembly. The opposition forces were
aided by the mass media which frequently asserted its independ-
ence by publicizing opposition positions. The opposition was at a
serious disadvangage, however, because Rhee maintained a virtual
monopoly over political spoils, the prerogative of his strong Presi-
dency. Being victims of this system, National Assembly members
frequently abandoned party loyalty in the scramble for political
and economic rewards.

The discontent in urban areas during the 1950's which stimulat-
ed the growth of opposition groups was accompanied by a prolifera-
tion of new social and religious organizations. The Holy Spirit
Association for the Unification of World Christianity (Unification
Church) dates back to this period. It was founded in 1954 by Sun
Mjoing Moon.

In both his economic and foreign policy, Rhee was extremely
reactionary. He resisted initiatives which would have upset the
status quo on the peninsula, such as land reform and development
planning. His goal seemed to have been only to restore the prewar

economy. Rhee was sure that reunification would be achieved and
would make industrial expansion in the south redundant.

During these years, U.S. economic assistance again focused pri-
marily on relief, and in general there was little direct investment
by foreigners. The one important economic change was land reform
and redistribution, finally implemented, without enthusiasm from
President Rhee, in 1953.

Subsequent to 1953, U.S. policy in Korea was concerned with
three main issues: (1) The security of the ROK against new hostil-
ities, including any that might be provoked by rash South Korean
initiatives; (2) reconstruction of the economy; and (3) the develop-
ment of a free, representative, and stable government. Growing out
of these concerns was the desire that Korea and Japan normalize
relations. This possibility was publicly denounced and staunchly
rejected by President Rhee throughout his Presidency.

During the 1950's, military and diplomatic confrontation between
the ROK and the DPRK continued. The United States was deter-
mined to insure the security of the ROK against attack. Korean
security during this period was bolstered by the Mutual Defense
Treaty, the presence of sizable numbers of U.S. troops, and large
amounts of U.S. military assistance.

FALL OF THE RHEE GOVERNMENT

President Rhee's persistent efforts to manipulate the electoral
process reached a peak in 1960. The March Presidential election
was marred by widespread irregularities, and on April 19, thou-
sands of students massed in front of the National Assembly, de-
manding his resignation and a new election. The political crisis
became more tense with daily demonstrations throughout Korea.
The climax of the student revolution came on April 19 when nearly
200 students were killed by police gunfire as they marched on the
Presidential Palace. Rhee's fate was determined by the fact that
the army refused to use force against the students. On April 26,
Rhee offered to hold new elections and resign if the people so
desired. The National Assembly, meeting in emergency session,
approved a resolution calling for his resignation. He did so on April
27.

The amended constitution provided for a parliamentary system
under a Prime Minister, elected by the National Assembly, and a
President with less power than Rhee had had. New elections were
held in July. Assemblyman Chang My on (John M. Chang) became
Prime Minister, while Yun Po Sun was elected President. The
United States immediately recognized the new government and
offered economic assistance. The Chang Government, together with
U.S. economic advisers, instituted long-term economic planning,
much of which was later incorporated into the economic plans of
the military government after 1961.

During the 9 months of the Chang Myon Government, there
were few restrictions placed on political activity, freedom of expres-
sion, and the press. Approaches toward reunification — a topic
which had been taboo under the Rhee Government — were aired
and debated openly. Some elements of the ROK military were
fearful that the DPRK might perceive this as a sign of weakness

and launch another attack. No buildup in the DPRK was observed
by the United States at this time, however.

MiUTARY Government: 1961-63

In late April 1961, the U.S. intelligence community was aware
that a significant group within the ROK Army, probably led by
Park Chung Hee, was reportedly planning a coup. It was believed
that there was a definite threat of a takeover. However, political
stability, including the absence of civil disorder and a strengthened
police force, was such that a successful coup attempt did not
appear likely. Prime Minister Chang Myon reportedly shrugged off
the rumors of a coup.

1961 MILITARY COUP

The U.S. Government reports proved correct. Early in the morn-
ing of May 16, 1961, a force of 3,500 troops overcame token resist-
ance and quickly secured the radio stations, powerplants, police
stations, and important public buildings. At 5 a.m., the military
takeover was announced in the name of Lt. Gen. Chang Do Young,
Army Chief of Staff.

The nearly bloodless military coup was the culmination of long-
festering dissatisfaction among some elements in the military, espe-
cially members of the 8th class of the Korean Military Academy. In
particular, they were bothered by obstacles to rapid promotion and
the factionalism and corruption of many of the senior officers.

Although the coup was announced in the name of Lt. Gen.
Chang Do Young, it soon became clear that the principal figures
were Maj. Gen. Park Chung Hee, the oldest and the highest rank-
ing of the activists, and Lt. Col. (Ret.) Kim Jong Pil, the chief
organizer and planner. Apparently General Chang was forced to
take part in the coup to prevent resistance within the Army.^ The
core group contained a number of members of the 8th class, includ-
ing Park Chong Kyu, Kim Hyung Wook, and Suk Jung Sun. Aside
from strong ties growing out of the Korean Militai'y Academy,
many members had also served together in the G-2 military intelli-
gence unit.

Park Chung Hee was born in a rural village in southeastern
Korea in 1917. After graduating from normal school, he attended
the Japanese military academies in Manchuria and Tokyo and
then served as an officer in the Japanese Kwangtung Army. In
1946, he attended the Korean Military Academy, a member of the
2d class. Sentenced to death in 1948 for participation in the Com-
munist-led Yosu rebellion, he was eventually released through the
intervention of Gen. Paek Sun Yop, chief of G-2 military intelli-
gence. He was given a job as a civilian intelligence officer at G-2 in
Army headquarters. There he met Kim Jong Pil and Suk Jung
Sun, who played key roles in the military government. They them-
selves were graduates of the 8th class and among the 15 members
of that class chosen by General Paek to work at G-2.* Shortly after

'Message from COMUSK/CGEUSA to JCS, Washington, D.C. (EUSA JOC 70305) May 17,
1961, White House copy, pp. 1-2. This message indicates that Chang urged the UNC to take
military action against the coup and that he did not authorize the use of his name. For full text
-see appendix C-1.

* Staff interview with Suk Jung Sun, Sept. 7, 1977.

the outbreak of the Korean war, Park was reinstated in the Army.
As was the case with many other ROK military officers, Park at
one point attended an advanced military course in the United
States. He was transferred 25 times in 11 years and was not
promoted as rapidly as he might have been, apparently because he
remained aloof from Army politics. Resentment over this treat-
ment may have played a role in his decision to participate in the
coup.

Kim Jong Pil, who was related to Park by marriage, was born in
south-central Korea in 1926. He graduated from teachers college
where he was rumored to have been involved in leftwing student
politics. After teaching for a short time, he entered Korean Military
Academy and graduated in the 8th class in June 1949. He spent his
entire military career in G-2 military intelligence.^

One of the first acts of the coup leadership on May 16 was to
declare martial law, dissolve the National Assembly, and ban polit-
ical activity. Power was placed in the hands of a military revolu-
tionary council which pledged, among other things, to fight com-
munism; observe the U.N. Charter and Korea's international agree-
ments; strengthen ties with the United States and other friendly
nations; reestablish morality in government; make Korea economi-
cally self-reliant; work toward reunification of the peninsula; and,
those goals accomplished, turn over the reins of power to new and
conscientious civilian politicians.®

The timing of the coup caught both the U.N. Command and the
U.S. Embassy by surprise. Both promptly expressed their disap-
proval in the following public statement, without waiting for au-
thorization from Washington:

General Magruder, in his capacity as Commander-in-Chief of the United Nations
Command, calls upon all military personnel in his command to support the duly
recognized Government of the Republic of Korea headed by Prime Minister Chang
Myon. General Magruder expects that the chiefs of the Korean Armed Forces will
use their authority and influence to see that control is immediately returned to
governmental authorities and that order is restored in the armed forces.'

Speaking on behalf of the U.S. Embassy, Charge d'Affaires Mar-
shall Green reiterated that stand and confirmed U.S. support of
the constitutional government.

Much of the opposition from American officials in Korea
stemmed from ignorance about the backgrounds of the coup leaders
and a suspicion, because of U.S. Government reports, about past
involvement in Communist activities. In these reports, it was noted
that Park had flirted with communism while an Army officer in
the mid-1940's before it became clear which of several groups
would assume control in South Korea. Evidence suggested that
Park was indeed a Communist during the 1948 Yosu revolt, and he
was later tried, convicted, and given a death sentence because of
this charge. He won a reprieve, evidently because he provided
information that led to the apprehension of approximately 300
Communist agents. It was said that Park's sentence was reduced to
10 years because of efforts by Chung II Kwon and others.

* The above discussion of the events of the coup is based in part on Kim, Se-Jin, The Politics of
Military Revolution in Korea (Chapel Hill: University of North Carolina Press, 1971), pp. 86-101.

• Op. cit., message from COMUSK/CGEUSA to JCS, p. 3.
' Ibid., p. 5.

Gregory Henderson, then the cultural attache at the U.S. Embas-
sy, also suggested that because most coup participants could not
speak English, contact between them and the American military
had been limited.® There was also the issue of returning ROK
troops to U.N. Command operational control. Finally, the Chang
Myon Government had the strong support of a key group of Em-
bassy officials centered around Charge d'Affaires Marshall Green,
political counselor Donald Ranard, and cultural attache Gregory
Henderson. They felt that, despite problems, the Chang Myon Gov-
ernment had been moving in the right direction. More democratic
than the Rhee Government, it had been, partly at the urging of the
U.S. Embassy, reluctantly adopting economic, defense, and foreign
policies which this group felt were more realistic. Furthermore, it
had agreed to assume a greater part of the cost of defense.^ Writing
later, Henderson noted the tremendous difficulty Chang's Govern-
ment had faced in instituting such far-reaching measures. He sug-
gested that, however well intentioned, U.S. insistence on their
implementation was ill-timed because of the frailty of his Govern-
ment.^® These American officials were to play key roles in Korean-
American relations over the next decade.

RELATIONS WITH THE UNITED STATES

The junta, for its part, was very anxious to get U.S. recognition
as a symbol of its legitimacy. It attempted to counteract the effect
of the Magruder and Green statements by misrepresenting the U.S.
position in the Korean press, saying, for example, that Washington
did not support those statements. ^^ Although Green and Magruder
had acted without advance notification, the State Department later
fully backed their actions. ^=^

The subcommittee looked into allegations that the U.S. CIA had
supported the coup. While it was not able to investigate all allega-
tions, it found no evidence to support this theory. The subcommit-
tee interviewed a number of officials on both the Korean and U.S.
sides. None indicated any U.S. involvement and all commented on
initial hostility of the U.N. Command and the Department of State
to the coup. One former U.S. official testified that he had formed
the impression that ''[the CIA] like the rest of the Embassy * * *
supported the anterior Democratic regime and regarded its violent
successor with suspicion and antipathy." "

The junta moved quickly to consolidate its power. On May 19,
1961, the Military Revolutionary Council changed its name to the
Supreme Council for National Reconstruction (SCNR). Within 6
days, it had arrested more than 2,000 "corrupt" politicians, includ-
ing Chang Myon, and by the end of the summer it had taken into
custody about 17,000 civil servants and 2,000 military officers, in-

* Henderson, Gregory, Korea: The Politics of the Vortex (Cambridge: Harvard University
Press, 1968), p. 461, footnote 38.

» Staff interview with Marshall Green on Sept. 16, 1977.

'" Op. cit., Henderson, p. 181.

" Department of State incoming telegram from Seoul to Secretary of State, No. 1585, May 19,
1961. See appendix C-3.

*» Department of State, Memorandum for the President, May 18, 1961. See appendix C-2.

" "Activities of the Korean Central Intelligence Agency in the United States," hearings before
the Subcommittee on International Organizations of the Committee on International Relations,
95th Cong., 1st sess., Mar. 17, and 25, 1976, part I (hereinafter referred to as "SIO-1"), Hender-
son's testimony, p. 4.

eluding 40 generals.** The United States negotiated the release of
the generals, many of whom were pro-American. Most went to the
United States to study at Department of Defense expense and
many have remained in the United States. ^^ The SCNR also dis-
solved almost all political and social organizations, strictly con-
trolled the media, and banned demonstrations. Public reaction to
the coup was hard to gauge because of the tight control exercised
over the media.

During the first week following the coup, the U.S. Embassy in
Korea reported that the Korean public attitude was one of apathy
toward or passive acceptance of the coup and the junta. A month
after the coup, the Embassy recorded "doubt and apprehension"
among the urban populace, though the attitudes of the farmers
appeared favorable.

Relations with the United States were a major concern, impor-
tant both for military security and legitimacy. Even more impor-
tant, perhaps, was U.S. assistance, which had accounted for more
than 50 percent of the total national budget and more than 70
percent of the total defense budget.**

A new U.S. Ambassador, Samuel Berger, was assigned to Seoul
in early July. The Ambassador was to:

* * • seek to create a gradual recognition among the leaders of the Supreme
Council that it is in their interest and the interest of their country that they from
time to time reaffirm their intention to restore representative government and
constitutional liberties; and that failure over the long run to demonstrate their good
faith in this matter will compromise them in the eyes of the people of the United
States and other free world countries and in the United Nations. *'

The Ambassador was also "authorized to invite the chief of govern-
ment to Washington for an informal visit including conferences
with the President and the Secretary of State." *®

If the SCNR could satisfy the Ambassador that it would restore
representative government, recognize the U.N. Command's oper-
ational control over the ROK Armed Forces, and make certain
fiscal and economic reforms, then Berger was authorized to indi-
cate willingness to release $28 million in remaining military aid for
fiscal year 1961 and offer U.S. support for various economic proj-
ects and technical assistance in drawing up a 5-year economic
development plan. If the planning went well, the United States
would provide resources to help in its implementation.^^ At the
same time, the Director of the U.S. Information Agency was to
"arrange to assist the Korean Government, as may be appropriate,

'*Op. cit., Henderson, pp. 183-184; Joungwon A. Kim, Divided Korea: The Politics of Develop-
ment, 1945-1972 (Cambridge: Harvard University Press, 1975), p. 231.

- "Confidential staff interview with former aide to Kim Jong Pil on June 16, 1977; staff
interview with former ROK Gen. Kim Ung Soo on July 8, 1977.

'• Op. cit., Joungwon A. Kim, p. 233.

" Draft version of Record of Action No. 2430 of the National Security Council in its 485th
meeting on June 13, 1961, titled "Summary and Revision of Recommendations of Task Force
Report on Korea, pp. 1-2." The full text appears in appendix C-4. This document is the record of
the NSC's action taken at its June 13, 1971 meeting during which it discussed the report of the
Presidential Task Force on Korea. With the exception of the handwritten note on p. 6, the draft
is identical to the fmal version of the Record of Action. The underlinings noted in the document
are quotations from the full Task Force report, which remains classified. The draft Record of
Action is on file at the John P. Kennedy Library, Waltham, Mass.

'• Ibid., p. 2.

'•Ibid., pp. 1-3.

in defining and propagating national ideals and goals and in im-
proving the Korean image abroad." ^o

Contemporaneous Department of State documents indicate that
Ambassador Berger implemented the authorized policy. Repeatedly
over the years, the United States would apply this strategy of using
assistance — military and economic — as leverage to induce the
Korean Government to adopt certain policies and undertake cer-
tain reforms. American leverage was enhanced by the ROK Gov-
ernment's need for good relations as a symbol of legitimacy, both
domestically and internationally.

In response to the U.S. position, on August 12, 1961, Park Chung
Hee, chairman of the SCNR, announced that the Government
would be returned to civilian control in May 1963. He also released
thousands of prisoners and dropped charges against members of
the Chang Myon Government.^! By November 1961, the U.S. intelli-
gence community concluded that Park Chung Hee, although briefly
involved with the Communist movement in the 1940's, no longer
had any Communist sympathies or contacts. As leader of the junta.
Park was by then considered to be a powerful and capable leader.

In November, Park visited Washington and met with President
Kennedy. On November 14, the two issued a joint communique
reconfirming friendly ties and common interests. Kennedy reaf-
firmed the U.S. defense commitment to Korea, Park his intention
to restore civilian government.

The joint communique also stressed the economic development of
the ROK as a major objective of both governments:

* * * President [Kennedy] expressed great interest in Korea's draft 5 year econom-
ic development plan. In this connection, he assured * * * Chairman [Park] that the
U.S. Government would continue to extend all possible economic aid and coopera-
tion to the Republic of Korea, in order to further such long range economic develop-
ment."

From the beginning, the junta itself had expressed a commit-
ment to economic development. The Government's Economic Plan-
ning Council, building on the work done under Chang Myon, pre-
pared the First Five- Year Plan, issued on January 13, 1962. The
Government would play a major role in economic development.
The plan emphasized industrial growth, but self-sufficiency in food
grains was another major goal. The plan projected an average
annual growth in the GNP of 7.1 percent. Investment was to rise
by 51 percent during the period and exports were stressed. Little
increase in consumption was projected, and social welfare services
were not stressed.^^ The plan reflected the economic policy the
Government would pursue for the next decade — industrialization,
exports, massive investment, and continuing high rates of growth.

ESTABLISHMENT OF THE KCIA

On June 19, 1961, tne SCNR founded an organization which
would play a key role in most aspects of Korean life. The Korean
Central Intelligence Agency (KCIA) was established "to supervise
and coordinate both international and domestic intelligence activi-

"> Ibid., p. 7.

** Op. cit., Joungwon A. Kim, p. 234.

" Op. cit., Kim, Se-Jin, Documents on Korean-American Relations, p. 272.
" Kuznets, Paul W., Economic Growth and Structure in the Republic of Korea (New Haven:
Yale University Press, 1977), pp. 196-205.

ties and criminal investigation by all government intelligence agen-
cies, including that of the military. "^^ The agency rapidly expanded
into all aspects of life in Korea and soon reached Koreans living
abroad. According to reports of a U.S. intelligence agency, the
KCIA attempted to gain support for the ROK Government among
Korean residents in the Los Angeles area as early as 1963.^*

The KCIA was the brainchild of Kim Jong Pil, the principal
planner of the coup; he became its first director. Agency personnel
had at its core about 3,000 men from ROK Army intelligence. The
KCIA absorbed its predecessor, the Combined Intelligence Research
Center which, according to a former aide to Kim Jong Pil, had
close ties to the U.S. CIA. This center had been set up shortly
before the coup by Maj. Gen. Lee Hu Rak, military attache in
Washington, D.C., from 1956-59 and a major figure in future Park
administrations. At the time of the coup in May 1961, Lee was
arrested on charges of corruption; however, there were indications
that the real reason for his arrest was that he was considered too
close to Americans. After a few months, as part of an effort to
build good will with the U.S. Government, the military junta acced-
ed to American requests and released Lee. According to the same
aide, the U.S. CIA was instrumental in obtaining his release.^*

It has been alleged that the KCIA was founded with the coopera-
tion and assistance of the U.S. CIA. The subcommittee found no
evidence that this had been the case. In fact, several officials at the
Embassy at that time indicated that there had been no connection.
A former aide to Kim Jong Pil said that the U.S. CIA had provided
advice to the KCIA on organizational matters, but indicated that
he knew of no other U.S. role.^' A major U.S. Government recom-
mendation had been that the KCIA not combine domestic security
and foreign intelligence functions.^®

ORIGIN OF THE DEMOCRATIC REPUBLICAN PARTY

The breadth of the KCIA's role in the Government was apparent
in 1962 when it established the Democratic Republican Party
(DRP), which was still the dominant political party in Korea in
1978. Designed by Kim Jong Pil, the DRP had a centrally organized
and tightly controlled hierarchical structure, with the president of
the party, Park Chung Hee, at the top and the party chairman,
Kim Jong Pil, next. The party had a permanent staff of over 1,000
stationed throughout the country.

Although the military junta had pledged to eliminate political
corruption, by February 1962, the U.S. Embassy began receiving
information on corrupt business activities by the KCIA under Kim
■Jong Pil. These involved construction of the Walker Hill resort,
importation of automobiles from Japan, and manipulation of the
Korean stock market.^®

"Op. cit., Kim, Se-Jin, The Politics of Military Revolution in Korea, p. 111. See also "Part
C-II: Intelligence Activities and Plans," p. 89.

" Senate Select Committee on Intelligence, "Activities of 'Friendly' Foreign Intelligence Ser-
vices in the United States: A Case Study," June 1978, p. 5.

" Confidential staff interview, June 16, 1977.

" Confidential staff interview, Aug. 16, 1977.

" See "Part C-II: Intelligence Activities and Plans," p. 89.

"See "Problems of Political Funding and U.S. Trade and Investment in Korea" in "Part C-IV:
Economic Relations," p. 227.

In October 1962, KCIA Director Kim Jong Pil and other KCIA
officials traveled to the United States, where he had briefings at
the CIA, FBI, and Defense Department.^** Of more interest in light
of later events were two other aspects of the trip. One of Kim's
Korean escorts was Lt. Col. Pak Bo Hi, a military attache at the
ROK Embassy in Washington.^^ He later became the interpreter
and confidant of Unification Church leader Sun Myung Moon.
Second, the subcommittee learned that Kim met with and offered
support to Unification Church members in San Francisco during
this trip. Two individuals with personal knowledge of the meet-
ings— one a U.S. Government official at the time — attested to this.
On this trip Kim also met with Korean residents in the United
States — one of whom was Tongsun Park — in Washington, D.C.^*^

In preparation for civilian rule, in mid-1962 a new constitution
was prepared by a committee set up under the aegis of the KCIA.
It included two American advisers — Harvard Prof. Rupert Emerson
and New York University Prof. Gisbert Flanz.^^ As might be ex-
pected, the new constitution provided for a strong Presidency and a
strong party system. It was clear that Park was aiming for a
civilian government with tight control over the country. Martial
law was lifted on December 5, 1962. The constitution, submitted to
a referendum on December 17, was endorsed by 78.8 percent of the
voters and promulgated on December 26.

The election was preceded by an announcement by Park that he
and other members of SCNR could run for office if they retired
from the military. This set off an internal power struggle that
ended with Park as the accepted DRP candidate, Kim Jong Pil in
temporary exile, and several of his military opponents court-mar-
tialed.

Throughout this period, the United States continued to urge the
restoration of civilian rule. When, in March 1963, Park announced
a 4-year extension of military rule, the U.S. Government immedi-
ately took steps to have the decision reversed. Ambassador Berger
and other Embassy officials tried to dissuade Chairman Park. The
State Department publicly said:

We hope that the junta and the major pohtical groups in Korea can work out
together a procedure for transition to civil government that will be acceptable to
the nation as a whole.'*

President Kennedy also sent a strong personal protest.

These diplomatic measures were backed up by economic moves.
An ROK request for $25 million in economic aid for the 5-year plan
was denied, and the United States considered an end to all econom-
ic aid.^''

According to an executive branch report, during the summer of
1963, KCIA Director Kim Hyung Wook said that U.S. actions had
impeded Korea's progress since the 1961 revolution. Those actions
included pressure for an early return to civilian rule, opposition to

»» "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess., pt. 4,
Mar. 15, 16, 21, 22; Apr. 11, 20; and June 20, 1978 (hereinafter referred to as "KI-4") pp. 687-696.

" Ibid.

« Ibid., p. 690.

"Confidential staff interview, Dec. 16, 1977.

" New York Times, Mar. 26, 1963, quoting Lincoln White, DOS spokesman.

" Op. cit., Joungwon A. Kim, p. 248.

the Korean Government's objectives, and interference in Korean
politics.

On August 15, 1963, the Presidential election was announced for
October 15. Campaigning was restricted to a 30-day period. Despite
the fragmentation of the opposition parties among six candidates
and the preponderance of financial and human resources in the
control of the DRP, the election was extremely close. Park got 46.7
percent of the valid votes, and former President Yun Po Sun, the
main opposition candidate, received 45.1 percent. The election was
generally considered to have been fair.

The election for the National Assembly was held on November
26, 1963. The DRP won 110 of 175 seats— with only 32.4 percent of
the votes. The opposition, divided into 11 parties, had an average of
six candidates per district. This fact, superior human and financial
resources, and the proportional representation system had provided
the DRP with an insurmountable advantage. The electoral process
established by the military government was a critical factor in the
DRP's victory. The DRP had reinforced its inherent advantages of
finances anci visibility with economic tactics — * 'relief for the poor
and distribution of fertilizer to farmers * * *." 3« Self-serving elec-
toral procedures and economic tactics became trademarks of the
Park Government's approach to elections.

On December 17, 1963, Park took office, officially reestablishing
civilian rule.

President Park's First Term: 1963-67

This period was marked by the beginning of several important
trends that were to shape the nature of Korean-American relations
into the 1970's. Foremost were the consolidation of Park's highly
centralized control over the country and his government's strong
commitment to economic development, along with a shift in the
U.S. approach to economic assistance. In the area of foreign policy,
the ROK established formal ties with Japan and dispatched troops
to Vietnam, part of a major agreement with the United States
whose involvemciiL in Vietnam was to have great impact on poli-
cies toward Korea. Perhaps most important, it was clear by 1967
that Korea had made marked economic strides and was very close
to becoming self-sufficient. Ironically, while self-sufficiency was a
goal of both countries, that prospect produced uneasiness on both
sides and resulted in considerable tension over the coming decade.

NORMALIZATION OF RELATIONS WITH JAPAN

One of President Park's first acts after he took office was to
reopen talks with Japan. The United States had been pushing for
normalization of relations since the 1950's because Japan repre-
sented an important source of funds at a time of impending Ameri-
can aid cutbacks. For this very reason, the Park administration
was also interested in improved relations. Further, normalization
was symbolically important as a way of showing that Korea could
deal as an equal with its former colonial master.

The Korean public reacted to :he reopening of negotiations with
strong suspicions and many demonstrations. After 15,000 protestors

'•Op. cit,. Kim, Se^in, The Politics of Military Revolution in Korea, p. 111.

calling for Park's resignation attempted to storm the Blue House,
martial law was declared. Arrests were made, the press placed
under censorship, assembly prohibited, and schools closed. Martial
law was lifted in about a month. The renewal of ties with Japan
had caused particularly widespread opposition because Koreans
had not forgotten the years of harsh colonial rule. There was fear
of anything that could lead to a resurgence of Japanese influence.
Many opponents also feared that the Government would use the
resources gained through normalization to consolidate its domestic
political control.

On May 17, 1965, President Park made a 10-day state visit to the
United States at the invitation of President Lyndon B. Johnson.
The visit, which had important symbolic value, ended with a joint
communique from the two Presidents. Johnson praised the steps
regarding Japan and confirmed ''that U.S. military and economic
assistance to Korea would continue to be extended * * * after
normalization of Korean-Japanese relations. "^^

Demonstrations again resulted in martial law and the closing of
a number of universities and high schools. Protests continued for
the next few months. They were intensified on June 22, 1965, when
the Japanese Normalization Treaty was formally signed in Tokyo.
In a procedure that became standard in the coming years, the DRP
had waited for an opportune time to push ratification through the
Assembly. While the opposition was boycotting the Assembly, the
bill was put to a vote.

The treaty encompassed a broad package of grants and loans
totaling about $1 billion. As expected, this flow of money had a
great influence on economic development.^® Some of the funds were
also used for DRP political activities. It became a usual practice for
the Park administration to extract money through foreign loans
and foreign investments to fill the coffers of the DRP. The system
involving private commercial loans, an "open secret," was de-
scribed as follows:

Since private loans required Government approval and repayment guarantees,
the Korean party receiving foreign loans was required to pay a percentage (popular-
ly believed to be 10-15 percent and sometimes as much as 20 percent of the loan
amount) in payoffs to obtain the necessary Government guarantees. The system, of
course, applied to foreign loans from other nations as well. * * * Assuming a
kickback-ratio as low as 10 percent, this would mean political fund resources of
$25.6 million from this source [$256.1 million in private commercial loans in 1965
and 1966].='«

The decision to send Korean combat troops to Vietnam was made
at the May meeting between Presidents Johnson and Park during
the same period as the Japanese treaty crisis. In all, two divisions
were sent by 1966.

Johnson had pushed for Korean participation to legitimize U.S.
involvement and to show the solidarity of the free world in Asia.
To Korea, the act had symbolic value — Korea was assisting the
United States and another Asian country — but most important was
the economic assistance promised by Johnson in return for the
troop commitment. That assistance was to amount to $1.5 billion
over 5 years.

" Op. cit., Kim, Se-Jin, Documents in Korean- American Relations, p. 289.
38 See "Part C-IV: Economic Relations," p. 168.
'» Op. cit., Joungwon A. Kim, p. 264.

Once again, the Government's decision provoked widespread pro-
tests, to which it responded with severe reprisals. The National
Assembly authorized the troop deployment in the absence of oppo-
sition members who were boycotting.

The continued vitality of the opposition movement, composed
mainly of students, intellectuals, journalists, opposition party mem-
bers, and religious leaders, gave the Park Government a strong
incentive to strengthen further its system of political controls.
Funds from abroad provided much of the financial resources to do
so. The KCIA was very active in this effort:

The most apparent extension of political control was through the vast expansion
of the activities of the Korean Central Intelligence Agency * * *, during this phase
headed by Kim [Hvung Wook], a classmate (eighth class) of Kim Jong Pil. * * * By
the time of the 1967 elections, the Government's pervasive control of the society
through indirect means was well known. Conversations on sensitive subjects became
noticeably hushed, and the glance over the shoulder began to take on the character-
istic of a national nervous tic.*°

Despite the Government's frequent suppression of dissent, there
was far more tolerance of opposition in the mid-1960's than in later
years. For example, the press was much freer at this time.

The success of the economy contrasted with the troubled political
situation. When the First Five- Year Plan was completed in 1966,
many goals had been exceeded. The annual GNP growth rate,
which had been projected at 7.1 percent, was actually over 8 per-
cent. Annual per capita income had risen from $96 to $131. The
public recognized that the Park Government deserved credit for
these achievements.

The United States had played an active role in the growth of the
economy. Cooperation was excellent between the Park Government
and Embassy officials, particularly those at AID. There was consid-
erable agreement between Korean and American policies on the
economy. The difficulty was in getting the Government to imple-
ment certain measures which were politically unpopular and, at
times, the United States used aid as leverage to promote the meas-
ures and reforms it favored.

A key change in the economic attitudes at this time was Korean
acceptance of a gradual aid cutback, especially AID development
assistance, because Korea soon would no longer meet eligibility
requirements. Over the next few years, not only were the levels
reduced somewhat, but also the nature of funding changed. Origi-
nally most assistance had taken the form of grants; beginning in
1966, there was a shift toward loans.

The Second Five- Year Plan was made public in the summer of
1966 and was well received, even by the Government's critics. The
success of the First Five- Year Plan and the need for continuity, as
embodied in the second plan, were points often made by the Gov-
ernment in its bid for reelection in 1967.

1967 ELECTIONS

The DRP began to prepare for the 1967 elections under the
chairmanship of Kim Jong Pil. Kim Song Kon (S. K. Kim), a man
with a background in business rather than the military, was chair-
man of the all-important finance committee. Under him, DRP

♦» Ibid., p. 265.

fundraising extended to extorting money from American business.
For example, the Gulf Oil Corp. felt compelled to make a $1 mil-
lion payment in 1967 and a $3 million payment in 1971 directly to
S. K. Kim."

On May 3, President Park was elected to a second 4-year term.
He won 51.4 percent of the votes compared to 41 percent for Yun
Po Sun, the candidate of the opposition New Democratic Party
(NDP). This election was generally considered to be fair, but the
President and the DRP once again had tremendous advantages in
terms of funds, personnel, and public exposure.

In contrast, the election for the National Assembly, held June 8,
1967, was widely described as corrupt and dishonest. Numerous
incidents of ballot box stuffing, vote-buying, and intimidation were
reported. "^^

After the election, student protesters took to the streets and were
met by riot police. After several days, most universities and high
schools were closed. When the Government did not accede to NDP
demands for new elections, the opposition responded with a boycott
of the National Assembly which lasted until November 1967.

In mid-June 1967, over 100 Korean intellectuals were arrested in
the so-called East Berlin case. Most had received academic training
in West Germany. It was alleged that they had formed an espio-
nage ring operating on behalf of the DPRK. Over 20 were kidnaped
from West Germany and other European countries. Former KCIA
Director Kim Hyung Wook, who had been in charge of the oper-
ation, testified that three of those arrested were sent to Korea from
the United States with the cooperation of the United States, after it
received assurances that they would be allowed to return. ''Accord-
ing to this plan, we had them come to Korea voluntarily, had them
submit their confessions to us, and as agreed, returned them to this
country." ^^ Thirty-four of those arrested were tried on espionage
charges and all were convicted on December 13, 1967. Three re-
ceived death sentences. Although Kim Hyung Wook admitted possi-
bly being overzealous in his anticommunism, he staunchly asserted
the guilt of those arrested. Many Korean intellectuals believed, on
the other hand, that the incident was designed to remind them of
their vulnerability.

THE EMERGENCE OF THE MOON ORGANIZATION

Anticommunism, a cardinal point of national policy of the Park
Government, was the rationale for a number of ROK Government
decisions which were to affect Korean-American relations in the
late 1960's and early 1970's. As part of the effort to forge a national
anti»Communist ideology, the Government had joined the Asian
Peoples Anti-Communist League (APACL). In connection with that,
it sponsored a project to build a "Freedom Center" in Seoul. Efforts
were made by Kim Jong Pil and his lieutenants beginning in 1963

*» "Multinational Corporations and U.S. Foreign Policy": Hearings before the Subcommittee
on Multinational Corporations of the Committee on Foreign Relations, U.S. Senate, 94th Cong.,
1st sess.. May 16 and 19; June 9 and 10; July 16 and 17; and Sept. 12, 1975, part 12, pp. 8-9. See
also "Part C-IV: Economic Relations," pp. 232, 234.

♦* Op. cit., Joungwon A. Kim, p. 270.

" "Investigation of Korean- American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 1st sess., Part
1, June 22, 1977 (hereinafter referred to as "KI-1"), p. 38.

to raise private funds in the United States for this project. In 1965,
Kim persuaded the newly formed Korean Cultural and Freedom
Foundation (KCFF) to help support the Freedom Center project.

The KCFF was largely controlled by Pak Bo Hi and Yang You
Chan. Yang was the former Korean Ambassador to the United
States and served as roving Ambassador for the Korean Govern-
ment until his death in 1975. In 1966, the ROK Government helped
the KCFF launch a project called Radio of Free Asia (ROFA),
which broadcast anti-Communist programs from a Korean Govern-
ment facility in Seoul. These programs were monitored by the
KCIA. Another KCFF project, the Little Angels Dance Troupe, had
some of its world tours sponsored by the Korean Government. The
Little Angels had been founded by Sun Myung Moon and managed
by his followers. KCFF became increasingly involved with the
Moon Organization, as well as with the ROK Government.*'*

The KCFF, particularly its ROFA project, generated opposition
among U.S. Embassy officials and congressional leaders who felt
that the names of prominent Americans were being used to raise
funds in the United States for a ROK-controlled operation run by
persons of questionable background.*^

President Park's Second Term: 1967-71

By 1967, the ROK Government had established firm economic
goals based on the development of an export-oriented economy and
had demonstrated domestic political control through the DRP victo-
ries in the 1967 elections. However, the next few years were to be
difficult ones because of significant changes within South Korea
and in its relationship with the United States. During the period
1968-70, a series of international events raised South Korean anxi-
eties over military security. The Seoul Government was alarmed by
the U.S. response to these events, which the Koreans felt was not
commensurate with the gravity of the threats. Internally, during
this period President Park sought to consolidate his power and
assure reelection in 1971 by subverting the legislative process and
manipulating the Korean economy. Internationally, the ROK Gov-
ernment response to these events was to step up and coordinate
influence activities aimed at American officials and policy.

On January 21, 1968, approximately 30 DPRK commandos at-
tempted a daring raid on the Blue House in Seoul with the objec-
tive of assassinating President Park. They managed to cross the
38th parallel, infiltrate the city, and come within a kilometer of
the Presidential palace. Although none reached the Blue House,
the incident intensified ROK fears about its military vulnerability.
Two days later, the intelligence ship U.S.S. Pueblo and its crew
were captured by the DPRK, which claimed that the ship had
intruded into its territorial waters. President Park felt that reso-
lute action was required to insure ROK stability in the face of
these provocations. He urged the United States to retaliate with

"See "Moon Organization" in "Part C-V: Educational, Informational, and Cultural Activi-
ties," pp. 323fF and 355ff.

*» See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp.
119-121.

preemptive air strikes against the DPRK. The U.S. Government
declined in both instances.*®

Infiltration by North Korean commandos, having increased the
previous year, became even more frequent in 1968. The most sig-
nificant incident was the landing of 80-100 guerillas on the east
coast in November.

Despite the measures taken by the U.S. Government in 1968 to
demonstrate to both the ROK and the DPRK that it intended to
maintain the security commitment to the Seoul Government, ROK
Government concerns persisted. Indeed, some American efforts,
such as negotiations with the DPRK over the return of the crew of
the U.S.S. Pueblo, were viewed by the Korean Government as
tending to isolate the ROK further in its international relations.

Seoul viewed North Korea's bold provocations in 1968, and what
it regarded as unsatisfactory American responses, against the back-
drop of other seemingly foreboding events throughout the world.
ROK leaders were particularly concerned about developments in
the Vietnam war and the growing antiwar sentiment in the United
States. The famous "Tet offensive" in Vietnam had begun on Janu-
ary 30, 1968, only 1 week after the Blue House raid and the
capture of the U.S.S. Pueblo. That Communist military drive, while
quite successful initially, eventually was stopped. In light of the
growing antiwar movement in the United States, South Korean
leaders doubted the publicly stated U.S. intentions to pursue the
war vigorously.

ROK Government interest in acquiring a domestic arms produc-
tion capability dated from 1968 and was sparked by the Blue House
raid, Pueblo incident, and failure of the United States to respond
militarily. In April, Tongsun Park made an unsuccessful approach
to a West German manufacturer to purchase an arms factory on
behalf of his Government. In the same year, efforts were made to
purchase high-speed naval craft for the ROK Navy, with the inten-
tion of building such vessels in Korea as soon as possible. Subse-
quently, at the Second Defense Ministers Conference in the
summer of 1969, the two Governments agreed on the construction
of facilities in Korea to manufacture and assemble M-16 rifles.
This agreement was a key step in the establishment of the ROK
arms industry.*^

South Korean anxiety over security increased again in April
1969, when a U.S. EC-121 intelligence plane was shot down by
North Korea. Once again, the refusal of the United States to retali-
ate made ROK leaders even more doubtful about the dependability
of the United States as an ally, despite strong reassurances from
the Nixon administration. *«

Then, in July 1969, President Nixon announced his Guam doc-
trine," which put Asian allies on notice that in future conflicts
they would be expected to rely on their own manpower to resist
armed aggression, although the United States would honor treaty
commitments and provide assistance in the form of military mater-
iel. He was responding to the public demand in the United States
that there be *'no more Vietnams." Korean leaders were confident

♦« See "Part C-I: Security and Political Affairs," pp. 54-56.

" See "Special Issue: ROK Defense Production and Military Self-Sufficiency" in "Part C-I:
Security and Political Affairs," pp. 76-78.
"See "Part C-I: Security and Political Affairs," p. 58.

that the special relationship between the ROK and the United
States would serve to exempt their country from the new policy. In
fact, Nixon was to make South Korea the principal example of
implementation of the Guam doctrine.

THIRD-TERM AMENDMENT

Contemporaneous with the growing feelings of military insecur-
ity was a domestic political crisis brought on by President Park's
maneuvering to prolong his hold on political power. Park, having
been elected in 1963 and 1967, was ineligible under the existing
constitution to run for a third term. The victory of the DRP in the
1967 elections, giving the party a two-thirds majority in the Na-
tional Assembly, however, made possible a constitutional amend-
ment that would allow Park to run for a third term. Opposition
fears of DRP efforts to keep Park in power through a change in the
constitution were realized in 1969. The Government's plans to
amend the constitution became widely known in June, prompting
nationwide demonstrations by students throughout the summer
and fall. It was quickly noted by demonstrators that the riot police
sent to control these demonstrations were transported in trucks
clearly marked to indicate that they had been obtained with the
assistance of U.S. AID."^

In July, Park stated that he would resign from office if a nation-
al referendum on the third-term amendment was not favorable.
Shortly after this announcement, he met with President Nixon in
San Francisco. Although the U.S. Government took no official posi-
tion on the third-term issue at the time of the meeting, the Korean
press suggested that Nixon favored it.

Rivalries and political bargaining among the top ROK political
leaders were central to the success of the third-term amendment in
the National Assembly. S. K. Kim and Kim Jong Pil, both with
strong bases of support within the DRP and the Assembly, reached
an agreement with Park Chung Hee, in which they would support
the amendment in return for the resignations of Lee Hu Rak from
the Blue House Secretariat and Kim Hyung Wook from the
KCIA.^o On September 14, the 122 DRP members of the National
Assembly approved the third-term amendment in a secret session
held at 2:30 a.m. The amendment was ratified in a national refer-
endum on October 17, with the approval of approximately 65 per-
cent of those voting. However, the amendment failed to carry a
majority in the Seoul area, symbolically significant in light of the
concentration of Korean media and intelligentsia there. Nonethe-
less, President Park had succeeded in changing Korean law to
allow him to run in the coming Presidential election.

The referendum was marred by allegations of fraud and cash
payments to rural voters. The DRP reportedly spent $15 million to
insure victory.*^

** A group of American residents in Korea, asserting that the official U.S. position of neutral-
ity on the amendment was not credible in light of the extent of U.S. involvement in Korea, cited
these trucks in a discussion with Ambassador Porter as an example of the kind of thing which
was taken by Koreans to indicate U.S. support for President Park's policies. Soon thereafter
Port«r reported to the group that the problem had been "solved" by repainting the trucks to
cover the AID symbol.

^"See "Problems of Political Funding and U.S. Trade and Investment in Korea," in "Part
C-IV: Economic Relations," p. 232.

" Op. cit., Joungwon A. Kim, p. 276.

32
DEVELOPMENT OF THE KOREAN ECONOMY

Economically, the period 1968-71 was of great importance to the
expansion of export-oriented industry and was marked by contin-
ued high growth. The Second Five- Year Plan, initiated in 1967,
stressed expansion of exports, continued mobilization of capital,
and development of infrastructure. Its objectives were attained in
many cases by the third year of the plan. By 1971, the last year of
the plan, the GNP had registered an annual increase of 9 percent
over the previous decade, and exports had expanded at an average
annual rate of 41 percent. ^^ Economic decisions made during
1968-69, particularly to engage in heavy foreign borrowing, were
crucial for the phenomenal growth of the ROK economy in the
1970's. There was also an increasing degree of economic indepen-
dence from the United States during this period due to the
strength of the Korean economy and the changing nature of U.S.
assistance.

These accomplishments were made, however, at the expense of a
mounting foreign debt to American and Japanese investors and
lending institutions. This wais in part the result of the change in
U.S. assistance from grants to loans, but also because of active
solicitation of foreign investment by the Korean Government. The
number and value of direct foreign investments by American and
Japanese corporations increased dramatically during this period.

These investments frequently included large mandatory pay-
ments to the ruling party and to ROK Government officials. The $3
million payment by Gulf Oil in 1971 was an example of such a
payment.

Foreign investment, and in particular joint ventures through
which foreign corporations manufactured finished goods in the
ROK for export, also came at the expense of workers' rights. Al-
though labor activity and strikes had been discouraged earlier, on
January 1, 1970, a special labor law was enacted which prohibited
labor union organizing, collective bargaining, and strikes by work-
ers in companies in Korea in which there was foreign investment.^^

Korean enterprises were able to secure massive loans from com-
mercial banks abroad between 1969 and 1971 due to the Govern-
ment's guarantee of repayment. Many of them encountered finan-
cial problems, and by 1971 over 200 enterprises had declared bank-
ruptcy.^'* The ROK Government was obligated to repay all foreign
loans on which these enterprises defaulted.

Korea suffered a lengthy drought during the fall of 1968, result-
ing in a rice shortgige and higher prices for the domestic crop. The
United States agreed to make large-scale rice shipments to Korea
under the Public Law 480 ''Food for Peace" program. The ROK
Government wanted these shipments to supplement Korean rice
production and to maintain a low price for rice in urban areas.

In Seoul, Representative Richard Hanna (D.-Calif.) asked KCIA
Director Kim Hyung Wook to assist in having Tongsun Park desig-
nated as selling agent for Public Law 480 rice transactions. There-
after, rice sellers in the United States found that American agents
were unacceptable to ROK Government but that, by using Tongsun

Area Handbook for South Korea (DA Pam 550-41, 1975), pp. 228-229.

Korean Legal Center, Laws of the Republic of Korea (3d ed.). (Seoul, 1975), pp. 853-854.

Op. cit., Joungwon A. Kim, p. 278.

Park, they were able to conclude sales. At the time, kickbacks were
reportedly being made to Korean political leaders from the com-
missions paid to Tongsun Park.^'^

Although Public Law 480 rice shipments eased a domestic politi-
cal problem by lowering the rice prices paid by urban workers,
they had a deleterious effect on the rural sector. The prices paid to
rice producers were concomitantly low, seriously depressing an
already neglected sector of the economy. It was not until 1972 that
the Government turned its attention seriously to the agricultural
sector. From that time on, emphasis was placed on the "New
Village Movement," a 10-year program for mobilizing capital and
labor for modernization of the agricultural sector. Rural productiv-
ity and incomes have improved substantially since that time.*^

Basic to the economic changes wrought by the Government in
the latter part of this period was the growth of a small number of
large trading and industrial conglomerates. Some which underwent
expansion at this time were the Hyundai, Samsung, Daewoo, and
Ssangyong groups.

The growing strength of the Korean economy was an important
factor in the U.S. reappraisal of the ROK's ability to support the
burden of its own defense and in Nixon's decision in 1970 to reduce
the number of U.S. troops in Korea.

REDUCTION OF U.S. FORCES IN KOREA

The decision to withdraw 20,000 U.S. troops from South Korea
and to provide funding for a 5-year plan to modernize the ROK
Armed Forces (subject to approval by Congress) was made by Presi-
dent Nixon early in 1970 pursuant to recommendations by the
National Security Council (NSC). The decision was based on an
increased ROK defense capability, U.S. budgetary considerations
requiring worldwide reductions in troop deployments and a U.S.
domestic political climate in which positive evidence of military
withdrawals from Asia was imperative.

The United States had decided that troop reduction and ROK
Armed Forces modernization should be initiated simultaneously,
but the Seoul Government, concerned that Congress might not
approve funds for the modernization program, insisted on military
modernization prior to troop reduction. President Park's resistance
to troop reduction was based partly on genuine security concerns.
However, he was also worried about possible negative impacts on
the economy and the 1971 Presidential election."

Given the Korean Government's alarm over its security and
perception of a lessening of U.S. commitment, when it was revealed
that 10,000 U.S. troops had already been withdrawn through attri-
tion, Korean leaders felt their doubts were justified. The Govern-
ment decided that they needed to take measures outside regular
diplomatic channels to influence U.S. policy.

KOREAN EFFORTS TO COORDINATE INFLUENCE ACTIVITIES

Well aware that Congress held ultimate power over funding of
the modernization program and that favorable public opinion

"See "Part C-IV: Economic Relations," pp. 207-215.
*«See "Part C-IV: Economic Relations," pp. 184-185.
" Department of State cable of July 31, 1970, KI-4, pp. 508-509.

would influence the vote in Congress, the South Korean Govern-
ment began a major effort designed to insure funding and to win
the support of the American people for its position. As early as
June 1970, Korean concerns had heightened to the point that Am-
bassador Porter informed the State Department that the Govern-
ment appeared ''prepared to pull out all stops in order to impress
the U.S. Administration and Congress. * * *"^®

Immediately after discovering in late August that the 10,000
troops had already been withdrawn, the ROK Government began
to lay the groundwork and set the pattern for the large-scale
lobbying and covert influence activities of succeeding years.

High-level meetings were held in the Blue House, some of them
chaired by President Park, to consider various plans for centraliz-
ing and controlling from the Blue House ROK Government lobby-
ing in Washington on troop reduction and military modernization.
Various plans were offered for consideration, one of which called
for Tongsun Park to be in charge of all lobbying in the United
States. A plan for an organization composed of American and
Korean parliamentarians, scholars, and businessmen, headed by
Tongsun Park, wais also considered. Several individuals already
working for ROK interests in Washington were to have their activ-
ities coordinated under Tongsun Park. Later it was decided instead
to assure Blue House control by establishing a foreign policy
review board in the Blue House which would coordinate the sepa-
rate influence operations.^^

One of these operations occurred in mid-September 1970 when
President Park signed 60,000 letters which were sent to Americans
thanking them for contributions to Radio of Free Asia, part of the
KCFF. The letters noted that "Communist neighbors surrounding
us are ever increasing their hostilities to our own free Korea." Pak
Bo Hi of the KCFF had prepared the letters and traveled to Seoul
to arrange for the President's signature.^®

On September 13, the Conference for the Development of Free
Institutions was incorporated in Washington, with various Mem-
bers of Congress listed among its supporters. It had been organized
by Tongsun Park and Kim Kwang, a relative of Park who worked
in two congressional offices and was later identified as being con-
nected with the KCIA.«i

In October, a Blue House official, in an apparent attempt to alter
Voice of America news broadcasts to Korea, made an offer of
money to an official of the East Asia and Pacific Division of the
Voice of America, who turned it down.^^ a paper dated October
1970, entitled 'Tlan for Korea's foreign Policy Toward the United
States," was found in Tongsun Park's home in 1977 by Federal
investigators. It advocated inviting Members of Congress to Korea
to persuade them to support the Korean position on the foreign aid
bill. The plan also called for the contribution of $380,000 to the

"KI-4, p. 503.

"See "Executive Branch Awareness of Questionable Korean Activities," pp. 124-125.

*''See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp.
126-127, and the "Moon Organization" in "Part C-V: Educational, Informational, and Cultural
Activities," pp. 364-365. The letters generated additional contributions to Radio of Free Asia, some
of them sent directly to the Blue House, and the Blue House expressed pleasure over the results of
the project.

«"See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," p. 125.

"See "Part C-V: Educational, Informational and Cultural Activities," p. 307.

1970 congressional election campaign, the use of American busi-
nessmen to pressure Congress, and the obtaining of intelligence
information from the CIA.^^

Agencies of the U.S. Government received reports on most of
these activities almost immediately. Ambassador Porter was in-
structed in late 1970 and early 1971 to inform Korean leaders of
U.S. Government concern about improper influence activities in
Washington. Porter had meetings with senior Korean Government
officials, including Prime Minister Chung II Kwon, at which he
urged that influence activities be curtailed and that Tongsun Park
be recalled to Korea.^*

Some U.S. officials were disturbed to learn in June 1971 that an
aide to a Congressman was passing classified information to the
Korean Embassy from the Congressman's subcommittee. Donald
Ranard, testifying before the Subcommittee on International Orga-
nizations, said, "[W]ith respect to what I had seen, I regarded it as
highly reliable, important, and very sensitive, and it appeared to
indicate to me that there was a direct connection between the
Korean CIA and a Korean by the name of Kim Kwang, who was
working in Congressman Gallagher's office.""

In the summer of 1971, the State Department transmitted infor-
mation about other improper Korean activities to the Justice De-
partment and requested an FBI investigation. Concurrently, a U.S.
intelligence agency transmitted similar information to the FBI.
The FBI conducted a perfunctory investigation in response to
State's request, but did not investigate the information of the intel-
ligence agency. Instead, it sent it to Attorney General John Mitch-
ell and Presidential Assistant Henry Kissinger; however, neither
recalled seeing more than a small portion of the information. A
former FBI official testified that the reason the second transmittal
was not investigated was because the originating agency had
placed a limitation on investigative use due to its high sensitivity.^^

Ambassador Porter testified that he perceived a permissive atti-
tude among Washington officials who were not inclined to take
action on Korean influence activities, and he believed that Korean
participation in the Vietnam war was the reason.®^

Ironically, in mid-1971, South Korea withdrew 12,000 troops from
Vietnam, partly in reaction to the cutback of U.S. forces in Korea.
This was done despite American pressure to postpone withdrawals.
Economic benefits from participating in the Vietnam war contin-
ued, however, until 1973, when the last remaining forces returned
to Korea.

1971 ELECTIONS AND KOREAN DOMESTIC UNREST

In addition to dealing with its concerns over foreign policy and
security, at this time the Korean Government was also active in
trying to control domestic criticism and prepare for the 1971 elec-
tions for the Presidency and the National Assembly. Several per-

"See "Part C-II: Intelligence Activities and Plans," pp. 102-104.

•♦KI-4. p. 68.

"KI-4, pp. 90-94.; see also "Part C-III: Executive Branch Awareness of Questionable Korean
Activities, pp. 134-135.

**See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp.
129-143.

•'KI-4, pp. 60-61.

.■5.T-.50R n - 7H

sons, including the well-known poet Kim Chi Ha, were arrested for
criticizing the Government and were prosecuted under the anti-
Communist law.

President Park's opponent in the 1971 election was Kim Dae
Jung of the New Democratic Party (NDP). Whereas the opposition
had been split badly in the elections of 1963 and 1967, in 1971 it
was united behind an attractive candidate. During the election
campaign, there were frequent demonstrations against alleged
campaign irregularities, particularly the ruling party's use of local
police and other Government officials to intimidate the opposition
and promote the interests of the ruling party. The American Em-
bassy informed Washington that the Park Government was also
manipulating the economy to alter the election outcome. In the
months before the election, the Government substantially in-
creased the amount of cash in circulation and made credit easier to
obtain. These policies later caused serious problems for the econo-
my, in the opinion of AID officials.®® The ruling party's finances
were still being managed by S. K. Kim, who this time demanded a
payment of $10 million from Gulf. He eventually exacted a cam-
paign contribution of $3 million. Other U.S. corporations also con-
tributed to DRP campaign finances, either directly or indirectly.^®

Between April 9 and the election on April 27, the Government
made a series of announcements and revelations involving national
security which created a crisis atmosphere during the final days of
the campaign. For example, on April 9, a North Korean spy report-
edly turned himself in and confessed to plotting a coup d'etat; on
April 20 and 23, two espionage rings were revealed, and on April
24, President Park ordered all ROK military forces on full combat
alert. Immediately before the election. President Park made an
announcement promising that this election would be his last bid
for public office.

President Park defeated Kim Dae Jung by a vote of 53 percent to
45 percent, according to the official count. The opposition party
immediately charged widespread irregularities. Student demonstra-
tions followed throughout the month of May, and there were calls
for a new election.

In the National Assembly election on May 25, the opposition
party made substantial gains, capturing 89 of the total 204 seats.
The DRP won 113 seats with only 48.8 percent of the vote, but
failed to gain control of two-thirds of the National Assembly, de-
priving President Park of the votes required to amend the constitu-
tion again should he want to seek reelection 4 years hence.

The closeness of the 1971 elections and the social unrest that
followed deprived President Park of a clear mandate. Immediately
following the National Assembly election in May, the Government
closed four universities. At Seoul National University, 23 leaders of
the demonstrations were expelled, prompting another demonstra-
tion.

"See "Part C-IV: Economic Relations," p. 186.

*'See "Problems of Political Funding and U.S. Trade and Investment in Korea" in "Part C-IV:
Economic Relations," pp. 225-258.

NORTH-SOUTH DIALOG

In the midst of this unsettled domestic situation, on July 15, the
United States and the People's Republic of China announced unex-
pectedly that Henry Kissinger had visited Peking and that Presi-
dent Nixon would do so before May 1972. The response of the ROK
and the DPRK to this change in the international situation was
quick and encouraging. The two Governments expressed a willing-
ness to have direct talks with each other, and on August 20, the
first meeting was held at Panmunjom between representatives of
their respective Red Cross organizations.

Despite this hopeful development, the Park Government contin-
ued to face domestic problems. There was a great deal of trouble on
the campuses, primarily over the issue of compulsory military
training for students. In October, troops were deployed against
students, 10 universities were closed, 2 campuses were occupied,
and many students were arrested.

Park was also having problems within his own political party. As
a result he moved to consolidate his political position in June by
appointing Kim Jong Pil Prime Minister, while leaving the DRP
organization in the hands of Kim's opponents. The ensuing faction-
al strife culminated on October 2 when Kim's opponents joined the
opposition party in a vote of no-confidence against the Minister of
Home Affairs, who was responsible for police handling of student
demonstrators.^" The defectors were quickly forced to give up their
seats and allegedly were tortured by the KCIA.

On December 6, Park declared a state of national emergency, one
step short of martial law, because of the rapidly changing interna-
tional and domestic situation. He asserted that the measure was
made necessary by the admission of the People's Republic of China
to the United Nations and the aggressive attitude of North Korea.
By the end of the year, he had assumed further extraordinary
powers through which he imposed wide economic controls, restrict-
ed aissembly, and regulated the press.

The economic situation had become precarious in the latter half
of 1971. President Nixon's new economic policy had worldwide
repercussions that affected South Korea's foreign trade and bal-
ance of payments. Further, the United States had pressured the
Korean Government into limiting textile exports to the United
States.^^ By the end of the year, the Korean Government was
forced to request additional credits from the United States and
other donors and early in 1972 was faced with a general economic
slowdown. With that slowdown continuing, on August 3, 1972,
President Park decreed emergency economic reforms whose goals
were to shift funds from the informal lending market into regular
banking institutions, control inflation, and strengthen marginal
industries.

- The economic problems with the United States at this time were
also partly the result of the activities of Tongsun Park. During
1971, the Korean Government had removed him as selling agent
for rice transactions after U.S. Government representations and
because of internal factional strife. However, on March 21, 1972,

^° Lee Chae-Jin, "South Korea: Political Competition and Government Adaptation" in Asian
Survey, January 1972, pp. 40-4L

''See "Part C-IV: Economic Relations," pp. 191-196.

American rice suppliers were informed by the Korean Government
that once again Park was to be the sole selling agent of rice for
Korea. When U.S. Department of Agriculture officials became
aware of this requirement, which violated Public Law 480 regula-
tions, they pressured Tongsun Park into withdrawing as selling
agent. Nonetheless, he continued to receive commissions on Public
Law 480 rice deals through another corporation, Daihan Nongsan,
which fronted as the selling agent.^^

The domestic political situation in South Korea was relatively
quiet during the first half of 1972, despite continued criticism by
the opposition. Kim Dae Jung, for example, protested the state of
emergency imposed by President Park; Stephen Cardinal Kim cri-
tized the president for totalitarian policies. Nevertheless, the state
of national emergency served to keep dissidents under control.

On July 4, 1972, the Governments of both the ROK and the
DPRK issued a surprise joint communique on the peaceful unifica-
tion of Korea. ^^ It had resulted from a secret trip to Pyongyang by
KCIA Director Lee Hu Rak and a secret trip to Seoul by the Vice
Premier of the DPRK. The two sides agreed that unification should
be achieved through the independent efforts of the two countries
by peaceful means after first seeking to promote a broad consensus
on various matters among all Korean people, north and south; not
to defame each other or to undertake armed provocation; to pro-
mote exchanges of various unspecified kinds, and to cooperate in
the Red Cross talks. To facilitate continued communications, they
agreed to set up a direct telephone line between Seoul and Pyon-
gyang and to establish a North-South Coordinating Committee. The
U.S. Government was pleased with this development, having urged
it for some time.^*

Korea Under the Yushin Constitution

President Park saw the negotiations with the North as reason for
more Government control and vigilance in the South. He told his
Cabinet that the ROK internal system had to be consolidated so
that the mood of "excessive optimism" would not allow the infiltra-
tion of Communist ideology. His intentions became clear on Octo-
ber 17 with a declaration of martial law and the announcement of
the "October Revitalizing Reforms" (Yushin Reforms). He dissolved
the National Assembly, suspended parts of the constitution, for-
bade political activity, imposed censorship of the press, closed the
universities, and announced that in 10 days he would propose a set
of amendments to the constitution which would be submitted to a
national referendum within 30 days thereafter. The Yushin amend-
ments announced on October 27 amounted to a new constitution.
Park said that the ROK had had many problems because "we have
always attempted awkwardly to imitate closely the democratic in-
stitutions of others," ^^ and that he therefore was offering a

"See "Part C-IV: Economic Relations," pp. 210-215.

'" For the text of this communique see SeAJin Kim, Korean Unification: Source Materials with
an Introduction (Seoul 1976) pp. 319-320.

'* American-Korean Relations, Hearings before the Subcommittee on Asian and Pacific Affairs
of the Ck)mmittee on Foreign Affairs, U.S. House of Representatives, 92d Cong. 1st sess., June 9,
1971, Porter's testimony, p. 58.

^* Korean Overseas Information Service (KOIS) "Draft Amendments to the Constitution of the
Republic of Korea" (Seoul, 1972) p. 10.

"Korean-style democracy." Park's Government had been faced with
the problem of justifying authoritarian rule in democratic terms
since the day of the military coup 11 years earlier. The concept of
''Korean-style democracy" was an attempt to solve that problem.

A State Department press spokesman said that the U.S. Govern-
ment was not consulted about the decision to impose martial law
and was notified only shortly before the declaration was made. He
made it clear that the U.S. Government did not regard martial law
to be warranted in light of South Korea's economic, political, and
military strengi:h and the relaxation of tensions resulting trom the
North-South dialogue.'^ When the Yushin declaration /as made,
the United States had to put its policy together quickly. At that
time Seoul was in considerable favor in Washington because of the
economic achievements and the negotiations with the North.
Therefore, the policy adopted was one of noninterference. President
Nixon reiterated the policy when he told Prime Minister Kim Jong
Pil in January 1973 that "unlike other Presidents, I do not intend
to interfere in the internal affairs of your country."'^

President Park warned the South Korean people that if they
failed to approve the national referendum on the Yushin amend-
ments, "we will be permanently dropped out of the future progress
of world history." ^® Furthermore, if the amendments were rejected,
he would "take it as an expression of the will of our people against
the North-South dialogue and therefore seek another approach to
the task of national unification." "^^ No campaigning was allowed.
However, official election management committees and "persons of
learning and virtue" selected by the committees were to * guide and
enlighten" the voters on the amendments and voting procedures.®^
In the November 21 referendum, 91.9 percent of those eligible
voted, and 91.5 percent of those voting registered approval.

The Government moved quickly under the Yushin reforms. On
December 13, martial law was lifted. President Park was reelected
on December 23, receiving all of the valid votes cast by the special
electoral body called the National Conference for Unification pro-
vided for by the new constitution. He formally promulgated the
Yushin Constitution at his inauguration on December 27. On Feb-
ruary 27, of the following year, 146 members of the new National
Assembly were elected; 73 were members of the ruling DRP. An-
other 49 supporters of Park Chung Hee were appointed by the
President with pro forma approval of the National Conference for
Unification. The National Assembly was convened on March 12,
and on the same day Park banned public rallies and demonstra-
tions.

Essentially, the Yushin Constitution placed virtually all power in
the hands of President Park: *^ The President is the chairman of
the National Conference for Unification, which elects him; he ap-
points the members of the Central Election Committee, which over-
sees elections; he appoints one-third of the National Assembly; he

" Department of State, "Transcript of Press, Radio, and Television Newsbriefing," Tuesday,
Oct. 17. 1972, 12:15 p.m. (DPC 192), p. 1-6.

" Confidential staff interviews.

'-Op. cit.. KOIS, p. 10.

"• New York Times. Oct. 18. 1972. p. 10.

•» "Seoul Issues Rules for Referendum." New York Times, Oct. 24, 1972.

*' For the full text of the Yushin Constitution, see Korean Legal Center, Laws of the Republic
of Korea (3d ed.) (Seoul, 1975), pp. 1-17.

can dissolve the National Assembly at any time; he has the power
to appoint and discipline all judges; and he appoints all the mem-
bers of the constitutional committee that determines whether the
laws passed by the National Assembly are constitutional. Should
these arrangements be deemed inadequate by the President, he can
take emergency measures regarding any of the nation's affairs
whenever, in his judgment, 'The national security or the public
safety and order is seriously threatened or anticipated to be threat-
ened." «=^

The following are illustrative examples of Park Chung Hee's
exercise of power under the Yushin system:

(1) Hundreds of students, intellectuals, and religious leaders (in-
cluding Catholic Bishop Tji Hak Soon) were arrested and sentenced
to prison for violating Park's 1974 emergency measures against
criticism of the Yushin system.

(2) Fourteen persons were sentenced to death in 1974 under one
of the emergency measures which forbade any contact with the
National Federation of Democratic Youth and Students, which had
issued a declaration criticizing the Park Government as a repres-
sive dictatorship manipulating the North-South dialog for its own
perpetuation. The sentences of some, including noted poet Kim Chi
Ha, were later commuted to life imprisonment, and some have
since been released. However, on April 9, 1975, 8 of the 14 who the
Government alleged were members of a * 'Peoples Revolutionary
Party" were hanged.

(3) In late 1974, the Dong-A Ilbo, a newspaper which had been
reporting on the movement to restore democracy, lost all advertis-
ing due to KCIA pressure. For a time, the newspaper was sustained
by the public through an increase in circulation and many small
anonymous advertisements supporting freedom of expression. The
campaign lasted until management eventually bowed to Govern-
ment pressure in March 1975.

(4) After being released in early 1975, the poet Kim Chi Ha was
arrested again, this time for writing articles for the Dong-A Ilbo in
which he criticized the Government and asserted that the "Peoples
Revolutionary Party" was a Government fabrication. During the
course of his trial, Kim's earlier life sentence was reinstated, and,
upon conviction, he was sentenced to an additional 7 years. As of
1978, he was still in prison.

(5) In 1975, an amendment to the criminal code made it a crime
punishable by up to 7 years imprisonment for a Korean citizen to
say or do anything which might harm the welfare of or defame the
ROK while abroad or to any foreigner while in Korea. ^^

(6) In May 1975, President Park issued emergency measure No. 9.
The most sweeping of the emergency measures, it was still in effect
in 1978.8* The number of protest incidents dropped off substantially
under this decree, which prohibited dissemination of falsehoods,
criticism of the constitution, political activities by students, and
reporting to the public any act violating the decree.

(7) In 1976, 18 prominent political, academic, and religious lead-
ers—including Kim Dae Jung and Yun Po Sun— were tried and

" Ibid., p. 6, art. 53.

" The Emergency Christian Conference on Korea Problems, "Documents on the Struggle for
Democracy in Korea," (Tokyo, 1975) p. 250. A translation of art. 104, sec. 2 of the Criminal Code.
»* Hapdong News Agency, "Korean Annual 1977" (Seoul, 1977), pp. 359-361.

convicted for signing a declaration calling for the peaceful restora-
tion of democracy. Most have since been released with deprivation
of their political and civil rights; Kim Dae Jung was still a prisoner
in October 1978.

(8) In July 1978, President Park ran unopposed and was unani-
mously elected to another 6-year term by the National Conference
for Unification.

REACTION TO YUSHIN ABROAD

Opposition to the Yushin system was expressed by Koreans
abroad immediately after Park Chung Hee's October 17, 1972, dec-
laration of martial law and announcement of the Yushin reforms.
Korean residents in Washington, D.C., Los Angeles, Tokyo, and
other cities staged protest demonstrations. Kim Dae Jung, in Tokyo
for medical treatment, issued a statement on October 18 denounc-
ing the Yushin declaration.

Criticism of Yushin was not limited to Koreans. Influential
American newspapers including the "New York Times," the Wash-
ington Post, and the Christian Science Monitor were critical of the
Park government. Prominent American academics such as former
Ambassador to Japan Edwin O. Reischauer also spoke out against
the new developments.

Although the executive branch of the U.S. Government did not
criticize the Yushin reforms, in February 1973, the Senate Foreign
Relations Committee released a staff report on South Korea and
the Philippines which was very critical of Yushin. It concluded that
President Park probably would remain in office until he died,
decided to resign, or was overthrown by a revolution.®^

The ROK Government began taking measures to deal with the
hostile reaction in the United States. A number of Korean Govern-
ment officials were assigned to conduct a public relations campaign
aimed at the American reaction. Several Korean residents of the
United States were called to Seoul early in December 1972 and
instructed to take measures to improve the ROK Government's
image in the United States.®®

The Korean Government also attempted to make increased use
of its diplomatic and KCIA personnel stationed in the United
States for improving its image. Lee Jai Hyon, cultural attache at
the Korean Embassy from 1970 until 1973, testified that he had
been given *'a series of unconvincing explanations" on Yushin by
officials in Seoul, and was instructed to ''tell the U.S. Government
and press that if there is internal opposition to [President Park's]
policies, he [Park] cannot negotiate from a position of equal
strength with Kim II Sung." According to Lee, Ambassador Kim
Dong Jo called frequent staff meetings at which KCIA station chief
Lee Sang Ho briefed the others on a scheme that employed seduc-
tion, payoff, and intimidation to win the support of the U.S. Gov-
ernment, the business community, the academic community, and
the Korean- American community for Park Chung Hee's policies.®^

»* "Korea and the Philippines, November 1972," a staff report prepared for the use of the
Committee on Foreign Relations, U.S. Senate, Feb. 18, 1973, p. 44.

•• See "Part C-III: Executive Branch Awareness of Questionable Activities," pp. 144-146.

" "Human Rights in South Korea and the Philippines: Implications for U.S. Policy," hearings
before the Subcommittee on International Organizations of the Committee on International
Relations, U.S. House of Representatives, 94th Cong., 1st sess.. May 20, 22, June 3, 5, 10, 12, 17,
and 24, 1975, p. 179. See also "Part C-II: Intelligence Activities and Plans," pp. 92, 101.

42
' HARASSMENT AND KIDNAPING OF KIM DAE JUNG

KCIA headquarters had been extremely upset about Kim Dae
Jung's activities in the United States in the first half of 1973.»»
Kim was speaking to groups of Korean residents and was in fre-
quent contact with the Korean desk at the State Department. He
was also writing letters to and meeting with Members of Congress,
journalists, and professors.®^ The KCIA closely monitored his move-
ments and tried to disrupt events in which he was participating.
Normally, each KCIA station in the United States reported directly
to Seoul headquarters, but for these operations all were placed
directly under the control of the station chief in Washington, Lee
Sang Ho.^° In mid-1973, the State Department received intelligence
information containing the allegation that the KCIA had contem-
plated having Kim killed by hired criminals in the United States.®*
As a result of this report and various accusations of harassment of
Korean-Americans, the State Department began to pressure the
Korean Government to stop such activity and to recall the KCIA
station chief, whom the State Department regarded as the princi-
pal cause of trouble.

In July 1973, Kim Dae Jung traveled to Japan, intending to
return shortly to take up a fellowship at Harvard. During the
daytime on August 8, he was kidnaped from his hotel room in
Tokyo by the KCIA. On August 13, he was released near his home
in Seoul, and 3 days later was placed under house arrest. Although
the details of Kim Dae Jung's release are not yet known, American
and Japanese Government reactions to the kidnaping definitely
played a role. As soon as Kim's disappearance became known in
Washington, the U.S. Government expressed strong interest in his
welfare. A nationwide public outcry swept Japan, and the Japanese
Government voiced concern about Kim.®^

There is circumstantial evidence that KCIA officials stationed in
the United States may have been involved in the kidnaping. Lee
Sang Ho, Choi Hong Tae, and Park Chung II — all from the Wash-
ington station — were in Tokyo or Seoul at the time of the kidnap-
ing. ^^ Other KCIA officers stationed in the United States traveled
to Tokyo and Seoul at the same time.

A State Department memorandum dated August 17, 1973 said,
''while the present ROK CIA chief remains in Washington he will
continue to be the source of contention in the Korean community
and embarrassment to the United States."®* In December 1973,
KCIA station chief Lee Sang Ho was recalled to Seoul as a result of
U.S. Government pressure. Shortly thereafter, using his real name
Yang Doo Won, he was promoted to Deputy Director for Security.

*» KI-4, Testimony of Kim Sang Keun, former KCIA official, p. 60.

"Staff interview with Lee Keun Pal, former secretary to Kim Dae Jung, Jan. 30, 1978.

»" "Investigation of Korean American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess.. Part 5,
June 1, 6, and 7, 1978 (hereinafter referred to as "KI-5), pp. 60-63.

*' Op. cit.. Senate Select Committee on Intelligence, p. 10.

»* See "Japan's Responsibility in Kim Dae Jung Affair," Donald Ranard, Mainichi Daily News,
Aug. 10, 1978. Ranard was Director of the Office of Korean Affairs of the Department of State at
the time of the kidnaping.

»' KI-5, letter to subcommittee staff from Kim Sang Keun, p. 176.

»* KI-5, pp. 166-167.

TONGSUN PARK AND THE U.S. EMBASSY

During the early 1970's, the activities of Tongsun Park continued
to be a sore point in Korean-American relations and a matter of
concern to Ambassador Philip Habib in Seoul. In letters to the
State Department between 1972 and 1974, he complained about
Park's various lobbying and commercial affairs, making it clear
that he regarded Park's activities to be detrimental to the best
interests of both South Korea and the United States. Habib also
informed the State Department that he had prohibited Embassy
personnel from having any contact with Park.^^

KOREAN QUESTION AT THE UNITED NATIONS

In 1971 and 1972, there were no debates at the United Nations
on the Korean question because of the ongoing negotiations be-
tween the ROK and the DPRK. When the talks broke down in
1973, the United Nations once again became a focus of debate on
Korea. On June 23, President Park, in a major reversal of policy,
proposed U.N. membership for both the ROK and the DPRK, and
announced that the ROK would not object to DPRK participation
in the U.N. debate on the Korean question even prior to entry. The
South Korean proposal was endorsed by the United States. By
supporting dual entry, the United States seemed to be shifting
away from encouraging efforts at reunification through North-
South negotiations, and toward a de facto recognition of separate
states, although the Department of State continued to endorse
eventual reunification of the Korean Peninsula. The DPRK reject-
ed President Park's proposal for dual entry, charging that it would
cause permanent division of the two Koreas. North Korea did
accept an invitation to participate in the U.N. debates, however,
and sent an observer delegation in November of 1973.

The presence of the DPRK delegation in the United States was a
new factor further increasing Seoul's concerns about anti-Park ac-
tivity by Korean residents in the United States. The Government
feared that the delegation would provide assistance to and attempt
to solicit support from the Korean-American community by dis-
seminating propaganda.^^ The ROK Government responded by in-
creasing its own propaganda efforts aimed at the United Nations,
including the assignment of covert KCIA operatives to the U.N.
posing as journalists, and centralizing all propaganda activities in
the United States under Ambassador Han Byung Ki of the ROK
Observer Mission to the United Nations.®^

The performance of the Little Angels dance troupe at the United
Nations in December 1973 represented another propaganda effort
by the ROK. To the surprise of those who attended the perform-
ance. Rev. Sun Myung Moon was introduced by Pak Bo Hi as the
founder of the troupe.^®

On November 18, 1975, the U.N. General Assembly adopted two
conflicting resolutions on the Korean question. Both called for the

•» KI-5, pp. 151-163.

•*See "Part C-II: Intelligence Activities and Plans," pp. 91-92.

®'KI-7, testimony of Kim Hyung Wook. See also "Part C-III: Executive Branch Awareness of
Questionable Korean Activities," p. 152.

»• Staff interview with Hahn Changsup, U.N. correspondent of Hapdong News Agency, on
June 22. 1977.

dissolution of the United Nations Command, but the one favored
by the United States provided for talks by the United States, North
Korea, South Korea, and China to find an alternative to the armi-
stice of 1953. The resolution favored by North Korea proposed
bilateral talks between the United States and North Korea, exclud-
ing South Korea. Since both resolutions were adopted, no action
could be taken on either.

THE OIL CRISIS

In October 1973, the OPEC nations quadrupled the price of oil,
which not only affected the cost of South Korea's petroleum im-
ports but also weakened demand worldwide for its exports. During
1974, the ROK Government attempted countermeasures to stimu-
late the economy, resulting in a huge balance-of-payment problems
which continued through 1975.

The oil crisis of 1973 also led to a greater degree of cooperation
between U.S. oil companies and their Korean partners. The South
Koreans were quite concerned that in the case of another Arab oil
embargo they would be penalized because of their close ties with
the United States. Therefore, they sought the guaranteed crude oil
supply which the American companies, with their access to non-
Arab sources, could provide. At the same time, with profits from
the sale of crude oil drastically reduced as a result of OPEC ac-
tions, U.S. oil companies sought a greater share of the profits from
their joint-venture refineries in Korea.^^

THE NIDECKER INCIDENTS

In May 1974, the Park Government made an attempt to buy
influence in the White House. John E. Nidecker, special adviser to
President Nixon on congressional affairs, testified that during a
visit to Seoul at that time he had been given an envelope contain-
ing $10,000 in U.S. currency. The envelope was signed by Park
Chong Kyu, Chief of the Presidential Protective Force. At Ni-
decker's request, the U.S. Embassy returned the money to Park.
During his stay in Seoul, the Koreans had tried several times to
restrict his contact with dissident religious leaders, including Ste-
phen Cardinal Kim. Shortly after Nidecker returned to the United
States, Korean National Assemblyman Row Chin Hwan visited him
at his White House office and offered to contribute funds to con-
gressional election campaigns to be designated by the White House.
Nidecker turned down the offer. ^°°

MOON DEMONSTRATION FOR THE KCIA

By the end of 1973, Sun Myung Moon and his Unification
Church had become highly visible in the United States, and ques-
tions began to arise as to possible ties with the Korean Govern-
ment. ^o| Moon's campaign to prevent the impeachment of President
Nixon intensified the controversy surrounding him and his move-
ment. In Korea, industries run by the Moon Organization had

9^ See "Part C-IV: Economic Relations," pp. 243-244.
•«»KI-5, pp. 13-31.

'"'See the "Moon Organization" in "Part C-V: Educational, Informational, and Cultural
Activities," pp. 338-343.

become defense contractors for the Government, and ROK officials
were attending anti-Communist indoctrination sessions at a Moon
training center.

In Seoul on August 15, 1974, during a ceremony commemorating
the liberation from Japan, Madame Park Chung Hee was shot and
killed by a Korean resident of Japan who was apparently attempt-
ing to assassinate President Park. The Korean Government blamed
the incident on Japan and, using public antipathy toward Japan
and genuine grief over Madame Park's death, organized demon-
strations almost daily for a month. In the most extreme demonstra-
tion, a crowd stormed the Japanese Embassy and sent diplomats
fleeing from their offices.

There were written orders to the KCIA in Washington in early
September 1974 which ordered a parallel anti-Japanese demonstra-
tion to be staged in the Washington area. The station chief, Kim
Yung Hwan, recruited a group of demonstrators. On the day when
the demonstration was to occur, Col. Lim Kyuil, another KCIA
official, received and carried out orders from Seoul to stop the
group of * 'Unification Church people" on their way to demonstrate
in front of the Japanese Embassy. ^°2 xhe subcommittee received
sworn testimony and other information confirming that this dem-
onstration had been planned at the behest of the KCIA and with
KCIA funds. ^o^*

CONGRESS CUTS MILITARY AID

In December 1974, Congress cut the administration's request of
$238 million in military assistance to Korea for fiscal year 1975 to
$145 million and provided that the amount could be raised to $165
million if the President certified to Congress that there had been
significant improvement in the observance of human rights in
Korea. The President did not make such a certification. The reduc-
tion in military assistance came as a result of joint hearings in the
House of Representatives by the Subcommmittee on International
Organizations and the Subcommittee on Asian and Pacific Affairs,
at which witnesses described widespread and systematic violations
of international human rights standards. ^^^ Cutting military assist-
ance because of human rights violations represented to the ROK
Government an odious linkage by Congress of two vital Korean
concerns — maintaining firm military support and enhancing the
image of the Park Government. These concerns were also the
reasons for the influence campaign in the United States. As a
consequence of the developments in Congress, lobbying became
more evident, with frequent visits to Congressmen by the ROK
Ambassador, approaches to Congressmen by Tongsun Park, and
invitations to visit Korea. Congressman Richard Hanna, in a
lengthy letter to President Park in August 1974, asserted that his
arid Tongsun Park's efforts had ''neutralized the effectiveness of
the hearings," and attested to ''the success of Mr. Tongsun Park's
activities on your behalf in Washington." He reported that five

'" KI-5, pp. 69-72.

■<« KI-5. pp. 2. 71, 72, 75, and 76.

'*>* "Human Rights in South Korea: Implications for U.S. Policy," hearings before the Subcom-
mittees on Asian and Pacific Affairs and on International Organizations and Movements of the
Committee on Foreign Affairs, U.S. House of Representatives, 93d Cong., 2d sess.; July 30, Aug.
3, and Dec. 20. 1974.

Congressmen who submitted statements for the hearings "were
personally selected by us," ^°* and in a separate letter to the Direc-
tor of the KCIA, that he and Tongsun Park "stayed up many
nights drafting these documents ourselves." ^°«

In the face of continued and growing opposition to his policies,
President Park announced on January 22, 1975, that there would
be a national referendum to ask for public support of the Yushin
system. He declared that if the people disapproved Yushin, he
would resign immediately. The referendum was to be held under
the emergency decrees which forbade criticism of the constitution
as well as under the rules against campaigning. The referendum
was held on February 12. According to official figures, the Yushin
Constitution was supported by 73.1 percent of the voters.

During 1974 and 1975, the ROK Government was in the process
of shifting Tongsun Park's responsibilities for influence activities
in Congress to Hancho Kim, a Baltimore businessman. ^°^ Park was
being phased out because his activities were considered too con-
spicuous and therefore a liability to the Korean Government. Influ-
ence activities during this period were directed increasingly by
Yang Doo Won, then the third-highest KCIA official in Seoul,
outside of normal channels. In many cases, the Washington KCIA
station chief was unaware of Yang's instructions because they were
sent directly to Kim Sang Keun, his subordinate.^**®

The Scandal Breaks

Beginning in the spring of 1975, there was a series of revelations
of questionable activities by the Korean Government which were to
have a serious impact on Korean-American relations.

At a May 16 hearing of the Subcommittee on Multinational
Corporations of the Senate Foreign Relations Committee, the chair-
man of Gulf Oil Corp. revealed that under Korean Government
pressure Gulf had paid the DRP $1 million in 1967 and $3 million
in 1971.1°^ The Gulf revelations have never been published in
Korea, and foreign publications carrying the story were censored.

In early 1975, certain intelligence information which the State
Department characterized as implying extralegal attempts by the
Korean Government to influence Members of Congress and their
staff was brought to the attention of Philip Habib, then Assistant
Secretary of State for East Asian and Pacific Affairs. Habib imme-
diately showed the information to Secretary of State Kissinger and
more detailed information was sought, at the request of the Presi-
dent.

On June 10, at hearings of this subcommittee regarding human
rights in South Korea, former Korean diplomat Lee Jai Hyon
outlined a plan for ROK influence activities in the United States as
it had been explained to him and other embassy staff by the KCIA
prior to Lee's defection in 1973. One aspect of the plan outlined by

"* Letter from Congressman Richard Hanna to President Park Chung Hee, Aug. 27, 1974; see
appendix C-5.

">« Letter from Congressman Richard Hanna to KCIA Director Chick Soo Shin (Shin Jik Soo)
Aug. 27, 1974, see appendix C-5.

•"^ See "Part C-IIL Executive Branch Awareness of Questionable Korean Activities," p. 151.

'»• See "Part C-IL InteUigence Activities and Plans," pp. 98-99.

'"•Op. cit.. Multinational Corporations and United States Foreign Policy, pp. 8-9; see also
"Part C-IV: Economic Relations," pp. 232, 234.

Lee was to "buy off American leaders — particularly in Congress."
Lee testified that he personally had seen Ambassador Kim Dong Jo
stuffing $100 bills into envelopes prior to visiting Capitol Hill."°
There was little public reaction to Lee's revelations at that time,
but his testimony led the subcommittee to begin an examination of
KCIA activities in the United States which in turn culminated in
this Investigation of Korean-American Relations.

In late 1975 Assistant Secretary of State Habib received addition-
al intelligence information. Secretary of State Kissinger obtained
President Ford's authorization to transmit the information received
from Habib to the Justice Department. The ensuing investigation
had a major impact on Korean-American relations in the succeed-
ing years.

During the fall of 1976, American newspapers printed a number
of articles on South Korean influence activities in the United
States, specifically mentioning Tongsun Park and the Justice De-
partment's investigation. In the midst of this publicity, Tongsun
Park left the United States in mid-October. A few days later, on
October 26, a front-page article with a banner headline appeared in
the Washington Post about the extent of Korean influence-buying
in Congress and the central role played by Tongsun Park.

The Park Chung Hee Government, shaken by the publicity, took
a series of steps to curtail the influence operations and to limit the
inquiries into its activities. On November 9, Yang Doo Won, who,
as noted above, had been in charge of many influence operations,
was dismissed by President Park. On November 23, the New York
Times reported that KCIA officer Kim Sang Keun was being re-
called to Seoul. However, Kim requested political asylum in he
United States, fearing that he would be held responsible for the
publicity over the scandal.

Following the defection of Kim Sang Keun, the ROK Govern-
ment became concerned that other KCIA officials might defect. In
early December, Seoul sent a high-ranking KCIA official to Wash-
ington to persuade station chief Kim Yung Hwan to return to
Korea; Kim did return. Other persons intimately involved in
Korean influence activities also left the United States during this
time. For example, in November and December Hahn Kwang Neun
of the Hankook Shinmoon and General Kang Young Hoon of the
Research Institute on Korean Affairs both left the United States.^"

On December 4, President Park ousted the director of the KCIA,
Shin Jik Soo, and replaced him with Construction Minister Kim
Jae Kyu. Seoul drastically reduced the number of KCIA personnel
in the United States. They were ordered to assume a low profile by
confining their activities to collection of intelligence from overt
sources or through liaison and to refrain from anything that might
be considered coercion, manipulation, or attempts to influence.

The unfolding scandal became a factor complicating the Carter
administration's conduct of relations with South Korea. During his
campaign for the presidency. Carter made a statement condemning
political repression in South Korea and calling for a phased with-

""Op. cit., "Human Rights in South Korea and the Philippines: Implications for U.S. Policy,
pp. 177-192.

'" Regarding Kang: Letter of Dec. 19, 1976 from Kang to his attorney, corroborated in a
number of staff interviews. Regarding Hahn: Staff interview with Kim Tong-Hyon on Nov. 15,
1977.

drawal of all U.S. ground troops."* The scandal in Washington
intensified the controversy over Korea in Congress and among the
public. By the beginning of 1977, when this Investigation of
Korean-American Relations was initiated, all three issues — troop
withdrawal, human rights, and the scandal — had become entangled
and seemed certain to complicate Korean-American relations for
some time to come.

'>' See "Part C-I: Security and Political Affairs," p. 71.

PART C

INVESTIGATIVE FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

This part of the report contains the findings, conclusions, and
recommendations of the investigation, reflecting the subject areas
which the Committee on International Relations directed the sub-
committee to study. There are five main sections: "Security and
Political Affairs"; "Intelligence Activities and Plans"; "Executive
Branch Awareness of Questionable Korean Activities"; "Korean-
American Economic Relations"; and "Educational, Informational,
and Cultural Activities." Two related issues are treated separately:
"International Agreements between the United States and the Re-
public of Korea" and "Immigration and Naturalization Service
Issues."

Each section begins with a brief review of the issues which were
covered in the inquiry. This is followed by the findings. Subse-
quently, the subcommittee's analysis and conclusions appear. In
some instances, the subcommittee also formulated recommenda-
tions, which are given at the end of each section.

I. Security and Political Affairs

In the international political setting, security has been the domi-
nant aspect of relations between the United States and the Repub-
lic of Korea (ROK). The subcommittee examined security and polit-
ical issues to determine what led South Korea to take extraordi-
nary measures to influence U.S. policy; to understand the steps the
ROK took to meet its security needs, given a reduced U.S. pres-
ence; and to describe the foreign policy context within which the
so-called "Koreagate" scandals occurred.

THE DYNAMICS OF THE REGION

Because of Korea's strategic location, its history has been
marked by extended periods of control or strong influence by four
powers — China, Japan, Russia, and the United States. However, its
present division is unprecedented. The invasion of the Democratic
People's Republic of Korea (DPRK) in 1950 and the subsequent 3
years of warfare involving both Chinese and American forces
served to solidify the post- World War II political division and sus-
tain the animosity and distrust between the two Koreas. In the
1960's and 1970's, however, certain events outside Korea changed
the cold war premises on which North-South hostility had been
based.

The Sino-Soviet split was one of the factors which encouraged
the United States and the People's Republic of China (PRO to
move toward normalization of relations in the early 1970's. Japan,
the other regional power with a strong interest in the Korean
Peninsula, developed trade relations with the PRC during the
1960's and established diplomatic relations in 1972.

Detente between the United States and the Soviet Union under-
lined the gradual shift from a bipolar world system to a multipolar
system. It was now conceivable that certain groupings of tradition-
al rivals could act together to achieve common goals (for example,
United States and Japan with the PRC). In the view of many
experts, the Sino-Soviet split made it nearly impossible for those
two powers to pursue a joint policy in support of North Korean
aggression. Furthermore, the military confrontation between China
and the Soviet Union at their border increased the desire of each
to see a stable situation in Korea. Others have pointed out that the
Sino-Soviet rivalry gave North Korea's Kim II Sung an opportunity
to play one Communist power off against the other. However, the
fact that the Soviet Union had not provided any military aid to
North Korea since 1973, while the PRC had continued to do so,
indicated that the Soviet Union did not feel compelled to compete
with the PRC in North Korea.

In 1971, talks between North and South Korea began in response
to the budding rapprochement between the United States and the
PRC and reduced tension on the peninsula following the lessening

(51)

35-508 O - 78 - 5

of armed infiltration by the North into the south. However, the
talks broke off in 1973 as a result of strongly held, divergent views
as to how reunification should be achieved.

The developments acted to reduce the level of tension on the
Korean Peninsula. However, there remained the question of how
the Sino-Soviet rivalry would influence Chinese and Soviet re-
sponses to a military move by North Korea against the South.
Although most analysts agreed that neither the Soviet Union nor
China would encourage the use of military force by North Korea to
expand its influence on the peninsula, there was disagreement over
how each country would react to a unilateral military action by
North Korea against South Korea. Most believed that because of
the Sino-Soviet rivalry, both would lend some form of military
support to North Korea and risk the consequences of a confronta-
tion with the United States. However, these predictions are compli-
cated, in the view of one analyst, by the fact the Soviet Union has
not supplied military assistance to North Korea since 1973. Fur-
thermore, Peking's efforts since 1971 to improve relations with the
United States and Japan would be seriously jeopardized if the PRC
became actively involved in a renewed Korean conflict.

Role of U.S. forces in South Korea

The subcommittee interviewed many U.S. military and civilian
officials concerning the nature of the military relationship of the
United States and the Republic of Korea. That relationship was
defined in large part by the origin of U.S. involvement in Korea,
the regional dynamics described above, and U.S. politics.

The primary role of the U.S. military since the Korean war has
been to deter an attack by North Korea. The potential for destruc-
tion on the Korean Peninsula is enormous and had been so since
the Korean war. By 1977, the region as a whole contained active
armed forces of over 1.1 million (ROK— 600,000; DPRK— 520,000),
and reserve forces estimated at over 4 million (ROK — 2.8 million;
DPRK — 1.8 million), making it one of the most militarized areas in
the world. Added to that were the extensive armaments available
to those forces.

It has been a tenet of U.S. policymakers that conflict could be
deterred by a proper balance of forces on the peninsula. The bal-
ance, since the Korean war, included a large U.S. military pres-
ence, under the aegis of the U.N. Command. U.S. forces in Korea
were, however, just one factor, though a key one, which contribut-
ed to deterring a North Korean attack. Other important factors
were the relative military strengths of North and South Korea and
-the strength of additional U.S. forces outside of Korea which prob-
ably would be introduced into any conflict.

U.S. forces also served to deter the ROK from attacking, or being
provoked to attack, the DPRK. Further, the presence of U.S. forces
in South Korea assured Japan of the constancy of its security
relationship with the United States.^ As long as there was no
question of the U.S. commitment to defend South Korea, little
doubt existed among the Japanese as to the strength of U.S.-

' The Japanese Constitution, which resulted from the U.S. occupation of Japan at the close of
World War II, prohibits the development of a Japanese military. However, Japan does maintain
defensive forces. Any change in this arrangement or the United States use of Japanese bases
for offensive operations would be a matter of controversy within Japan.

Japanese mutual defense arrangements. Thus the United States
acted as a stabilizing force in the region.

By the late 1960's, plans were made for withdrawing U.S. ground
troops from the ROK, with total withdrawal ultimately scheduled
for the 1980's. Given a reduced ground presence, the United States
has been and intends to contribute to the military balance on the
peninsula by means of the Mutual Defense Treaty, further modern-
ization of Korean forces, and development of ROK defense indus-
tries. This process has been occurring throughout the 1970's.

Succeeding subsections examine in closer detail the key factors
in United States-Korean security and political affairs in the 1960's
and 1970's.

FACTORS IN MODERN KOREAN-AMERICAN RELATIONS

The Vietnam war

From the time the United States first committed combat troops
to Vietnam in 1965, Washington had endeavored to involve Allied
Forces in the war.^ Enlisting Korean forces in the war effort was
given high priority. The United States needed Korean troops not
only to assist in military operations, but also for public relations
reasons. Worried about public support, President Johnson had to
"sell the war" as an important concern of the free world. He
needed to demonstrate that other non-Communist nations were
interested enough in South Vietnam's fate to sacrifice lives.

Only the Koreans made a commitment substantial enough to
provide that proof. From 1966 through 1973, South Korea main-
tained a force level of about 50,000 in Vietnam, a large commit-
ment for a country of only 30 million.

Korea favored participation in the Vietnam war for several rea-
sons, shared by both the Government and many citizens: the expe-
rience with North Korea made them want to make "a dramatic
demonstration of Korea's determination to join in the resistance
against Communist aggression"; ^ dispatching a combat force
abroad would be a sign of growing national maturity and strength;
and the benefits of additional payments from the United States
would be a plus for the economy.

In 1965, President Johnson invited President Park to Washing-
ton to discuss the proposed Korea-Japan treaty and the dispatch of
a division of ROK combat troops to Vietnam. Although President
Park agreed in principle to the dispatch, he needed National As-
sembly approval. Johnson helped him gain that approval with a
promise of $150 million in economic development loans, a commit-
ment to "maintain powerful [U.S.] forces in Korea,"* and a slowing
down of the transfer of U.S. helicopters and other military equip-
ment from Korea to Vietnam. (These commitments were later
spelled out in the Howze letter.) ^ The National Assembly approved
the dispatch with little debate.

* There is executive branch reporting indicating that the initiative originally came from the
ROK Government.

' Address by William Bundy entitled "Korea a Freeworld Partner in the Far East" before the
Korean Cultural and Freedom Foundation, in Washington, D.C., Sept. 29, 1965.

♦Joint ROK-U.S. communique, May 18, 1965, Department of State Bulletin 52:950-4, see
appendix C-8.

* General Howze letter, July 1965, see "Part C-IV: Economic Relations", p. 174.

In connection with the dispatch of a second division of ROK
combat troops, U.S. Ambassador Winthrop Brown signed what
became known as the ''Brown Memorandum" in March 1966. This
document superseded the Howze letter in 1965. It expanded the
types and amounts of compensation for Korean participation were
expanded. A senior American military officer in Korea at the time
told the subcommittee that the Korean Government had wanted
badly to commit more troops to Vietnam because of the foreign
exchange that would result. In the end, the total amount spent by
the United States for Korean participation in the Vietnam war
came to about $1 billion. Of this amount, about $925 million en-
tered ROK foreign exchange reserves.® The ROK Government bene-
fited also from the high pay rate the United States provided for
Korean troops (part of the agreement). They were paid at close to
U.S. pay levels but, according to Ambassador William Porter, "the
moneys were remitted to the government which then paid its
troops at levels which were substantially less." ^

Negotiations for an additional 11,000 Korean combat troops
began in the fail of 1967, and another compensation program was
drawn up. The planned date of deployment was March 1968, but
the Blue House raid and the capture of the U.S.S. Pueblo in Janu-
ary 1968 halted the plans.

Blue House raid

Coincident with the discussions over the deployment of more
troops, North Korea had begun a campaign to disrupt the South
which was marked by dramatic increases in border provocations,
infiltrations, and fatalities. In 1967 alone, infiltrations caused 131
deaths, compared with 35 the year before.®

The most notable incident occurred on January 21, 1968, when
North Korean commandos attemped to raid the Blue House, the
Presidential Mansion in Seoul, and assassinate President Park.^
This was the first terrorist raid on Seoul since the Korean war. On
January 16, a group of 31 armed commandos left Pyongyang for
the South. They had received 2 weeks of intensive training as part
of a 2-year program of the DPRK Army aimed at overthrowing the
ROK Government. The team was divided into six groups, each
having a specific mission within the Blue House.

Dressed as ROK soldiers, the unit crossed the DMZ undetected.
On the way to Seoul, four South Koreans were taken prisoner but
quickly released. Although they informed local authorities, the
commandos were successful in reaching Seoul.

The mission was thwarted when the team encountered ROK
forces approximately 1 kilometer from the Blue House. In the
ensuing gunfight and subsequent search for the commandos who
escaped, all but three commandos were killed, along with 2 Ameri-
can and 26 ROK soldiers. Two of the North Koreans escaped; the
third was captured and interrogated.

* General Accounting Office report "U.S. Assistance to the Republic of Korea," July 12, 1973,
p. 60.

^Subcommittee staff interview. William Porter was Ambassador to Korea from 1967 to 1971.

» Department of State bulletin, Oct. 3, 1968, p. 512, see appendix C-12.

•Statement by Ambassador Arthur Goldberg at the United Nations condemning North
Korean actions, Jan. 25, 1968; see appendix C-10.

The captured commando, 2d Lt. Kim Shin Jo, said at a press
conference that the objective of the mission had been "to get the
head of [President] Park and kill important subordinates. ^° He
had not expected failure, adding *'we came prepared to die for the
mission." ^^

Porter said it was clear the raid came as a great shock to the
Korean Government and people. Richard Ericson, the political
counselor under Porter, said the raid was an enormously signifi-
cant event to all South Koreans because they believed the North
Koreans "came within 800 meters of taking Park's life." ^^ The
event seriously affected confidence in their security and antiinfil-
tration capability.

The ROK Government wanted to respond with force, but the
United States was opposed. At a meeting immediately after the
raid, President Park told Ambassador Porter that ROK forces
could be in Pyongyang in 2 days' time. Porter replied that Park
"would have to do it alone." '' The Chief of Staff of the U.N.
Command, Lt. Gen. Robert Friedman, met that night with Minister
of National Defense Kin Sung Eun and told him, as instructed,
that the United States would take a dim view of any attempt at
armed retaliation.^^

The ROK Government was very upset by the failure of the
United States to respond strongly. As far away as Vietnam, Gen.
William Rosson reported ^^ that he sensed a change in attitude
among Korea officials. The commanding Korean general no longer
extended the customary invitations to eat in the Korean officer
mess or to exchange ideas informally.

In Washington, policymakers did not rule out the possibility that
President Park might launch a unilateral attack against the North.
In fact, it is unclear to what extent a ROK policy instituted in the
previous year to conduct retaliatory raids against the North played
a part in prompting the North Koreans to consider a more serious
raid into South Korea. There were indications the South had in-
flicted casualties in the north during short-range commando raids
in the fall of 1967.

Capture of the U.S.S. ''Pueblo"

Before the United States had time to decide exactly how to
respond to the Blue House raid, the intelligence ship U.S.S. Pueblo
was captured by North Korean forces near Wonsan on January 23,
1968 — only 2 days after the commando raid. The Pueblo had been
gathering information on the DPRK and the movement of Soviet
submarines in the Sea of Japan. According to U.S. radio triangula-
tions, the ship was 15 miles from shore, 3 miles outside DPRK
territorial waters. One crewmember was killed and the other 82
were captured without a fight, having spent most of their available
time destroying sensitive materials. In North Korea, harsh treat-
ment, including torture, resulted in confessions by Comdr. Lloyd

"•President Park had earlier tx)ld Ambassador Porter that Porter was the North Koreans'
"No. 2 target."

" The New York Times, "North Korea Says Kim Was To Assassinate Park," Jan. 23, 1969, p.
6.

" Subcommittee staff interview.

" Subcommittee staff interview".

'* Subcommittee staff interview.

Bucher and others, who admitted to trespassing in North Korea's
territorial waters on a "spy" mission.

In Washington and at the American Embassy in Seoul, the
Pueblo incident quickly overshadowed the Blue House raid. This
time the United States responded with urgency. Recapturing the
ship was out of the question — aircraft had not been able to reach
the ship's position in time, and when they did, the Pueblo had
already been towed within North Korean territory. However, 350
American warplanes were flown into South Korea without prior
approval by the Seoul Government; the carrier U.S.S. Enterprise
was positioned off the North Korean coast; and President Johnson
activated over 14,000 Air Force and Navy reservists as a military
backdrop to diplomatic efforts. Fearing the opening of a second
Asian front, Johnson explained, ''We had to be ready in case North
Korea started something, and we had to shore up the South
Korean defenses." ^^ On January 27, President Johnson denounced
North Korea for the Blue House raid and the capture of the
Pueblo.

He and other top U.S. officials held the view that the Blue House
raid and the capture of the Pueblo had been tactics planned by
North Korea to divert American attention on the ROK while the
Tet offensive was being mounted and to discourage South Korea
from sending more troops to Vietnam. On February 2, after North
Vietnam launched the Tet offensive, Johnson stated:

Practically every expert I have talked to on Korea and North Vietnam * * ♦
believe there is a definitive connection between the Pueblo incident and heightened
enemy pressure in South Vietnam."

South Korean leaders were highly indignant that the United
States was more concerned about the Pueblo incident than the
Blue House raid.^® They were already dismayed that the response
to the raid had not been stronger. Minister of Defense Kim Sung
Eun was upset that the United States showed little sympathy over
the near killing of President Park, whereas one boat caused it "to
move Heaven and Earth." ^® Foreign Minister Choi Kyu Ha de-
clared in a press statement that his Government was firmly op-
posed to Washington's emphasis on the seizure of the Pueblo over
the problem of North Korean infiltration. He said South Korea
would not agree to the North Korean suggestion to trade the Blue
House infiltrators for the Pueblo crew, nor would it tolerate the
U.S.-initiated bilateral talks between the United States and the
DPRK. More than 100,000 persons demonstrated in Seoul on Janu-
ary 31, demanding assistance from the United States and the
United Nations to prevent a recurrence of North Korean comman-
do raids. 2^

The ROK Government viewed the taking of the Pueblo as a side
issue, nothing to warrant the great significance it was accorded in
Washington. This gap between American and Korean perceptions

•« Johnson, Lyndon B., The Vantage Point (New York: Holt Rinehart, Winston, 1971), p. 536.
" The New York Times, Feb. 3, 1978, p. 8.
'* Subcommittee staff interview.
'• Subcommittee staff interview.

2° "United States began to put issue of Pueblo to North Korea," the New York Times, Feb. 1,
1968, p.l.

caused Korean leaders to begin rethinking the relationship with
the United States.^^

Vance mission

The situation in Seoul was extremely volatile, with talk of South
Korean retaliation against North Korea. Ambassador Porter rec-
ommended that President Johnson become involved. Accordingly,
former Deputy Secretary of Defense Cyrus Vance was sent to Seoul
in February 1968 as a special Presidential envoy to talk to Presi-
dent Park. Johnson told Vance the mission was important because
the United States could not afford a second war front in Asia.

The Vance mission had four objectives:

(1) To get the ROK to agree that it would take no independent
action against North Korea.

(2) To persuade President Park that the United States stood with
him and to reassure him of the strong mutual alliance between the
two nations.

(3) To try to dampen the desire for retaliatory action.

(4) To get ROK consent to United States/North Korean bilateral
negotiations on the release of the crew of the Pueblo.^^

In the end, Park and Vance agreed on avoiding military retali-
ation; and the communique issued at the close of the talks indicat-
ed administration support for a $100 million supplemental increase
in military assistance pending before Congress.

Vance described the 5-day mission as successful for having pro-
vided "renewed confidence in the solidarity of the alliance." ^^ He
recommended to President Johnson and Vice President Humphrey
that a comprehensive study of relations with the ROK be undertak-
en 2* and that the two countries hold high-level meetings annually
to discuss security issues.

The Honolulu meeting

At the end of March, the ROK Government became alarmed by
President Johnson's call to halt the bombing of Vietnam and his
announcement that he would not seek reelection. At a meeting in
Honolulu in April, when Johnson tried to persuade Park to commit
additional combat troops to Vietnam, he was apparently unsuccess-
ful. The joint communique described ROK-U.S. solidarity in resist-
ing communism both in Vietnam and in Korea but did not mention
mors troops.^^

Nevertheless, the combination of the Vance mission and the
Honolulu meeting did allay Korean fears somewhat.

In the meantime, DPRK activities had continued unabated. In
November, an 80-100 man guerrilla force landed on the coast of
South Korea; it took several weeks for United States and ROK
forces to capture or kill the infiltrators.

American policymakers tended to view these incidents against
the backdrop of the Vietnam war and global politics. To South
Korean leaders, however, the incidents were alarming develop-
ments in the context of the North-South confrontation. According-

" Subcommittee staff interview.

"Subcommittee staff interview.

""Confidence in U.S. Has Ebbed in Seoul," the New York Times, Feb. 16, 1968, p. 32.

" Subcommittee staff interview.

"Joint ROK-U.S. communique, Apr. 15, 1968; see appendix C-11.

ly, they felt frustrated over the failure of the United States to
respond more forcefully to Communist aggression in Korea and
Vietnam. Consequently, the incidents precluded an increase of
South Korean troops in Vietnam.

The EC-121 incident

Early in the Nixon administration, there was another incident
between the United States and North Korea. On April 14, 1969, a
naval intelligence plane, an EC-121 operating out of Japan, was
shot down by North Korea over the Sea of Japan. The 31 members
of the crew were killed. From all indications, the mission of the
EC-121 was routine and was conducted far from North Korean
territorial waters.

According to Nixon's memoirs,^^ the National Security Council
gave serious consideration to two responses. Option 1 involved a
retaliatory strike against a North Korean target. Option 2 would
continue the EC-121 reconnaissance flights but with combat es-
corts. Initially, Nixon and Kissinger favored retaliation, while Sec-
retaries Laird and Rogers counseled against it.^' In the end, the
President chose the second option to avoid the risk of opening a
second front and antagonizing the Soviet Union and China. Secre-
tary of State Rogers defended the decision later by saying ''[i]n
international affairs the weak can be rash; [but] the powerful must
be restrained." ^^

In South Korea, sentiments were different. The Minister of Cul-
ture and Information declared that ''the United States and other
free world nations in firm unity should take prompt and effective
action so that the North Korean Communists may not repeat such
a 'war game.' " ^^

Two days later, on April 20, 1969, President Park stated the ROK
Government position, adding the need for additional aid.

[The President] pointed out that similar incidents would take place in the future
unless the United States takes some tough countermeasures, [and asked] for the
U.S. military assistance on an increasing scale to keep military supremacy over
North Korea.^*"

The Guam doctrine

The next major incident in U.S.-ROK relations was Nixon's an-
nouncement of what came to be known as the Guam doctrine. In
April 1967, Nixon had traveled to Asia to renew contacts with
political leaders and further develop his ideas about the world
situation. In Indonesia, during an extensive talk with Ambassador
Marshall Green, Nixon emphasized the need to reduce commit-
ments of ground troops in Asia and to reevaluate relations with the
People's Republic of China.^^

Later in 1967, in an article in Foreign Affairs entitled "Asia
After Vietnam," Nixon envisaged a new policy, growing out of the
Vietnam experience:

»• RN, Memoirs of Richard Nixon (New York: Grosset and Dunlop, 1978) p. 384.

" Subcommittee staff interview.

" Korea Herald, "Powerful Nations Must Show Restraint," Apr. 18, 1969, p. 1.

" Korea Herald, "Red Shooting Act of Air Piracy," p. 1.

'0 Korea Herald, "Park Cabinet Discuss Reaction," Apr. 20, 1969, p. 1.

" Subcommittee staff interview.

One of the legacies of Vietnam almost certainly will be a deep reluctance on the
part of the United States to become involved once again in a similar intervention on
a similar basis.

»«*«*♦*

* • * [t]he central pattern of the future in U.S.-Asian relations must be American
support for Asian initiatives.^^

The article presented two other considerations of Nixon's: the
United States should contemplate establishing some kind of rela-
tionship with the People's Republic of China; and the United States
should be tolerant of Asian countries which were not following
western democratic ideals.

When Ambassador Marshall Green became Assistant Secretary
of State for Asian and Pacific Affairs in the Nixon administration,
he prepared a paper for the President setting forth what he consid-
ered to be Nixon's views. The points were derived from conversa-
tions with Nixon and from the Foreign Affairs article. Green de-
scribed a change in the mood of the American people as a result of
involvement in Asia:

While U.S. interests remain essentially the same and the commitments immuta-
ble, there is undeniably a change in mood of the American people. They will be
cautious about undertaking new commitments. They are becoming somewhat impa-
tient with carrying what many consider to be a disproportionate share of the
I burden of military security and economic assistance in areas which, while important
to the United States, are nevertheless distant. They are asking more and more
frequently what other countries are doing to help themselves and each other to
share these burdens. The attitude of the American people and the capacity of the
new administration to cooperate further in Asia will thus depend to an important
extent upon what the countries of the area are prepared to do for themselves and
for each other."

The culmination of Richard Nixon's rethinking of the U.S. role
in East Asia was revealed at an informal press conference on
Guam in July 1969. The contents and timing of the statement were
his own and suprised even his advisers. The policy he enunciated,
known both as the Guam doctrine and the Nixon doctrine, was to
be the basic theme of his administration's policy toward East Asia.
It contained three main propositions:

(1) The United States would honor its treaty commitments.

(2) The United States would provide a shield if a nuclear power
threatened the freedom of certain nations.

(3) In cases of other types of aggression, the United States would
furnish military and economic assitance when requested and appro-
priate, but nations directly threatened should assume primary re-
sponsibility for their own defense.

In conclusion, Nixon said,

* * * we must avoid that kind of policy that will make countries in Asia so
dependent on us that we are dragged into conflicts such as the one we have in
Vietnam."

The initial reaction of Korean leaders to the Guam doctrine was
expressed to Secretary of State Rogers and Marshall Green in
Seoul a few days after Nixon's press conference. Green recalled the

"Foreign Affairs, "Asia After Vietnam," October 1967, vol. 46, No. 1, p. 113, see appendix
C-9.

" "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess., Part
4, Mar. 15, 16, 21, 22; Apr. 11, 20; and June 20, 1978 (hereinafter referred to as "KI-4"), p. 21.

»* "Informal Remarks of President Nixon with Newsman at Guam," Documents on Korean-
American Relations: 1943-76, Research Center for Peace and Unification, Seoul, Korea, 1976.

Koreans as having five concerns.^^ The predominant concern was
whether the United States would remain a strong ally. The others
were the implications for aid, the strength of the U.S. stand on
Vietnam, and the U.S. position on North Korea overall and on the
infiltrations specifically. At the time, the Koreans seemed not to
view the Guam doctrine as ominous for their own security, nor did
they indicate any expectation that the level of U.S. troops might be
reduced pursuant to the doctrine.

The United States, in 1970, was to apply the Guam doctrine in
Korea by withdrawing 20,000 troops. The decision to do so related
directly to efforts to disengage from Vietnam. According to Gen.
John Dunn, Vice President Agnew's foreign affairs adviser, in
order for the United States to remove itself from Vietnam without
appearing to retreat, it had to be able to say that the Guam
doctrine applied to all of Asia. The foremost reason for the timing
of the reduction was to legitimize the Guam doctrine, and Korea
seemed the best possibility for implementing the doctrine outside of
Vietnam. ^^

Implementation of the Guam doctrine ^^ caused a severe disturb-
ance in Korea. Because of its contribution in Vietnam and its
historical ties with the United States, the Seoul Government had
assumed that its special relationship with the United States would
exempt it from the new policy.

Nixon-Park meeting

Partly in response to the Korean reaction and partly to Presi-
dent Park's desire to meet with Nixon as had President Thieu of
South Vietnam a few months earlier, less than a month after
announcing the Guam doctrine, Nixon invited Park to San Francis-
co for a state visit, August 21-23, 1969.3® Nixon greeted Park by
praising South Korea's ability to assume the major share of the
responsibility for defending Korea against the threat from the
North. 3^ He noted that South Korea had supplied more troops to
assist South Vietnam than any country other than the United
States. President Park endorsed the Guam doctrine as it related to
American encouragement of ''Asia for the Asians" and Korean self-
sufficiency. ^^

Ambassador Porter, who flew to San Francisco with President
Park, met privately with President Nixon before Nixon and Park
began their talks. The President wanted to know if troop reduction
in the ROK was feasible. According to Porter, Nixon said he
"would have to move on the matter of removing troops" because he
was under great pressure from Mr. Mills [Representative Wilbur
Mills (D.-Ark.), chairman of the House Ways and Means Commit-

" For State Department description of implementation of the Guam doctrine and for congres-
sional reaction to Guam doctrine (Congressional Record, July 28, 1969, S8637), see appendix
C-13.

'* Subcommittee staff interview.

" Vice President Agnew visited 10 Asian countries in December 1969. He told the subcommit-
tee that the Nixon doctrine was received by Asian leaders like a "lead balloon." Agnew believed
that longtime allies of the United States felt a sense of abandonment because of the new policy.
Subcommittee staff interview.

"Joint ROK-U.S. communique, Aug. 21, 1969, Department of State Bulletin 141:243; see
appendix C-14.

"The New York Times, "Nixon Greets Park— Stresses South Korean Responsibility for
Defense," Aug. 22, 1969, p. 8.

♦° White House press release, Aug. 21, 1969.

tee]."*^ Porter surmised during a subcommittee interview that
Nixon wanted the troop reduction in order to show the American
people he would fulfill his pledge to cut down troop deployments in
Asia. Porter told the President that he thought the reduction
would be manageable provided the United States did not "step up
the pace too rapidly. "^^ At the conclusion of the meeting, Nixon
told Porter that the Embassy would be receiving instructions from
Washington on reduction. Nothing was said publicly at the time.
One other significant issue, unrelated to the Nixon-Park meet-
ings, emerged at this time. A telegram signed by 200 Korean resi-
dents of the United States protested Park's intention to revise the
Korean constitution so he could run for a third term.'*^ The New
York Times reported that ''President Nixon was careful to avoid
any hint of political support for President Park in the South
Korean leader's effort to amend his nation's Constitution * * * "
However, by the time Park returned to Seoul, Nixon's statement
on the "remarkable gains by the ROK under Park's leadership" **
was being interpreted by Park's supporters as implying approval
for amending the Constitution.

1970-71 troop reduction

Many experts have argued that the withdrawal of U.S. forces
from South Korea in 1949 led to the North Korean invasion. Since
the end of the Korean war, the United States had maintained two
Army divisions in the ROK, and planning of troop movements in or
away from Korea was always handled with sensitivity.

Nevertheless, as early as 1963, discussions on troop reductions
were held at the Pentagon. In 1966, Secretary of Defense McNa-
mara expressed concern that U.S. troop strength was out of propor-
tion to the Pentagon's perception of the threat from North Korea
I and that South Korea was sufficiently strong to assume a greater
i role in its own defense. For those and also budgetary reasons, he
proposed a troop reduction. The plans were not carried out because
I of President Johnson's overriding interest in enlisting allies for
combat in Vietnam, according to an aide to McNamara."*^

George Newman, Ambassador Porter's deputy in Seoul from 1966
to 1968, recalled that both he and the Ambassador wanted to begin
removing ground troops from Korea."*^ One of their concerns was
that an attack on the North by the South would automatically
involve the United States. However, they saw the role of Korean
troops in Vietnam as so important they did not even consider
making the suggestion.

On the other side was Gen. Charles H. Bonesteel, U.S. /U.N.
Commander at that time, who was reported to have felt the United
States was being lulled into a false sense of security by the reduc-
tion in North Korean hostilities after the Pueblo capture. He
firmly opposed any troop reduction. Secretary of State Rusk, too,
argued that the current level of troops was needed for security and

If. [ *' KI-4. p.

" Subcommittee staff interview.

" The New York Times, "Koreans in U.S. Bid Nixon Shun Endorsement of Park," Aug. 19,
1969, p. 9.
** Op. cit., Joint ROK-U.S. communique; see appendix C-14.
*» Subcommittee staff interview.
** Subcommittee staff interview.'

political reasons, especially while ROK troops were fighting in
Vietnam.

In 1968, after Cyrus Vance's recommendation for a comprehen-
sive study of U.S.-ROK relations, the State Department compiled a
study which included the first formal recommendations for a grad-
ual phased reduction of U.S. ground forces. The State Department
study served as the impetus for the formation of a more formal
National Security Council (NSC) study group which was to consider
Presidential options on U.S. policy toward Korea. This group, how-
ever, did not finish its task by end of the Johnson administration.

With the change of administrations. Dr. Kissinger, President
Nixon's Assistant for National Security, reorganized the NSC. The
new organization included an office which conducted integrated
systems studies of U.S. relations with other countries. In February
1969, National Security Study Memorandum 27 (NSSM 27) was
issued, and it called for the continuation of the Korean study from
the previous administration and gave the NSC 1 year to complete
the project.

The outcome of this mammoth project was a decision on troop
levels in Korea. It had involved the full National Security Council
decisionmaking process, including discussions of options at five or
six meetings of the Senior Review Group. The group was chaired
by Kissinger and attended by top officers of the State Department,
Defense Department, Joint Chiefs of Staff, and Central Intelligence
Agency. With staff eissistance from the National Security Council,
a document was prepared, based on the Senior Review Group meet-
ings. The paper was submitted to the President and outlined three
options: Remove both U.S. Army divisions; remove one division; or
leave only several brigades. The President, acting on the advice of
the National Security Council, decided to remove one division — a
reduction of 20,000 men."^ That decision was designated National
Security Decision Memorandum 48 (NSDM 48) and was issued
March 20, 1970. It became the official document by which the troop
reduction was to be implemented.

NSDM 48 spelled out four related actions.** The first was to
inform President Park of the decision and explore with him the
timing and conditions of withdrawal. The reduction was to come at
President Park's ''initiative," the rationale being the strength of
ROK troops and future improvements. Second, the administration
would submit a proposal to Congress for a modernization program
for the Korean military. It would include military assistance at a
$200 million level per year between fiscal years 1971 and 1975, an
increase in economic assistance of $50 million a year or more
through the continuation of Public Law 480, and assurance that
the United States would not further reduce forces until ROK
troops had returned from Vietnam. The third item was an order
for the Departments of State and Defense to consult with Congress
on the aid increase and for Defense to develop plans for carrying
out the troop reduction and redeploying the remaining U.S. forces
away from the DMZ. Finally, a long-range plan for the U.S. pres-
ence in Korea was to be developed.

" Subcommittee staff interview.
** Subcommittee staff interview.

The decision to reduce the troop level in Korea was fully consist-
ent with the Guam doctrine. Dr. Kissinger told the subcommittee
"it was the general policy of the administration * * * to seek to
reduce American troop deployments abroad, and to shift the great-
er responsibility for their defenses to allied countries."*® Adm.
Thomas Moorer, Chairman of the Joint Chiefs of Staff in 1970,
listed two reasons for the timing of the decision: Nixon's desire to
implement the Guam doctrine and congressional pressure to ''bring
the boys home" from bases overseas.^° These two policies, he ex-
plained, would also make it less likely that the United States
become involved in another Vietnam. Gen. William Westmoreland,
Army Chief of Staff at the time, interpreted the decision as part of
the administration's program to cut down military spending world-
wide.^^

Secretary of Defense Melvin Laird thought in terms of "Koreani-
zation," a concept derived from the policy of Vietnamization he
had developed.*^ Laird's plan called for phased withdrawal of all
U.S. forces from Korea, with a first cut of 20,000 troops, followed
several years later by another. His successors at the Pentagon did
not carry the plan forward beyond the first reduction. ^^^

Implementation of NSDM 4S

Donald Ranard, the State Department's Director of Korean Af-
fairs in 1970, told the subcommittee ''that both President Park and
^ his kitchen cabinet saw the troop reductions as an issue which
must weaken him at the polls, and Park had one thing in mind,
and that is that he would win the 1971 election."^'*

In late March 1970, the decision to reduce troops was communi-
cated to Ambassador Porter, together with instructions to begin
f I conversations on the matter with President Park. Porter testified
a ! that Park's reaction was to tell him "that we would not be allowed
J to take our troops out, that we had no right to do that." ^^ Porter
d replied that though the United States and the ROK were friends,

0 the United States had no intention of giving a foreign country
control over its troops.

0 1 Stiff resistance from the ROK Government continued for several
e I months. There was particular concern that actual implementation
1 1 of the withdrawal be delayed until after the presidential election.
if Shortly afterward, the matter was further complicated when Chou
!i En Lai met with Kim II Sung, reviving ROK fears of collaboration

between China and North Korea.

For the ROK, the removal of the 2d Division from the DMZ

meant losing the "trip wire" that would involve the United States

e automatically.^® Porter recalled that the Korean Government said

« KI-4, p. 239.

** Subcommittee staff interview.
" Subcommittee staff interview.

"■Vietnamization and Koreanization are shorthand terms for the program of reducing United
States ground troops from those countries while the United States provides assistance to those
5 countries. The terms are synonymous with the principles of the Guam doctrine. However,
>5 ' Laird's use of the term "Koreanization" preceded the enunciation of the Guam doctrine. Sub-
committee staff interview.
^ " Subcommittee staff interview.
»* KI-4, p. 74.
I " KI-4, p. 41.

' »" The original plan had called for the removal of the 2d Division from the ROK. Since the 2d
Division had occupied a portion of the DMZ, it was to be replaced by Korean troops. The 7th

(Continued)

it would simply refuse to replace the American troops on the DMZ,
leaving the most vulnerable attack route unprotected. Porter re-
garded this as a ploy and paid it little attention.

The Korean Government's distrust of U.S. promises and policies
was evident. The ROK Government was particularly disturbed to
learn the United States was planning to redeploy the U.S. troops
stationed at the DMZ. The new closeness between Peking and
North Korea and the Pueblo and EC 121 incidents were cited as
evidence of a continuing threat. There was also the belief that
Nixon had exempted Korea from troop reductions at the meeting
in San Francisco in August 1969.^^ Further, the Nixon administra-
tion might not be able to get Congress to respond favorably; there
was no guarantee that the Congress would actually vote the funds
needed to implement the modernization program, although the
U.S. had emphasized to the ROK that it was an integral part of its
program to convince Congress to see the modernization plan as a 5-
year commitment, different from the normal annual security ap-
propriation. Finally, there was the Korean argument that United
States reductions in both Korea and Vietnam would damage the
Korean economy.

These perceptions, coupled with the belief that Korea had been
exempted from the Guam doctrine and the fear that Congress
might not respond favorably led to a great reluctance on the part
of the Korean Government to accept the U.S. plans for troop with-
drawal.

Korea unsure of congressional mood

The ROK Government had many reasons to doubt whether Con-
gress would appropriate assistance to Korea over a 5-year period.
However, it was a speech by Senator Joseph Tydings on the floor of
the U.S. Senate on April 9, 1970, that had caused the greatest
concern. Tydings criticized the Nixon administration for failing to
apply the Guam doctrine quickly to Vietnam, Korea, Thailand,
Japan, and other Asian countries. Under a section entitled ''U.S.
Troops Not Needed for ROK Defense," Tydings stated, "South
Korea today, without the assistance of any U.S. ground forces,
possesses the military manpower and resources to handle any inva-
sion threat North Korea could pose in the foreseeable future, pro-
viding U.S. air support is continued." Tydings also argued that
having U.S. forces on the DMZ as a "trip-wire" violated a provision
in the U.S Constitution by which only Congress can declare war;
"[f]or should the North Koreans invade across the DMZ, our front
line division would automatically trigger U.S. participation in a
ground war in Korea." Acknowledging the deterrent value of U.S.
troops, the Senator pointed out that one division would be as
effective as two. "Why would a North Korean attack on 30,000 U.S.
soldiers be any less likely to insure American entry into the con-
flict than an attack on 55,000 U.S. soldiers?" "

(Continued)

Division, the other U.S. Division in the ROK at the time, was to remain in a reserve position
south of the DMZ. As the troop reduction actually occurred, the 2d Division was removed from
the DMZ and placed in a reserve position, while the 7th Division was disbanded.

*' Subcommittee staff interview.

" Congressional Record, Senate, Apr. 9, 1970, pp. 85514-5518; see appendix C-15.

After Tydings' statement appeared, Under Secretary of State U.
Alexis Johnson went to great lengths to calm ROK Ambassador
Kim Dong Jo. However, by late April, Ambassador Porter received
indications that the ROK Government was taking its case directly
to Congress. He informed the State Department that the Koreans
were displaying an increasing tendency to rely on friends in Con-
gress to introduce bills, regardless of administration policy.

In May, the Korean Government continued to insist that the
"meager" assurance of support for a military modernization pro-
gram was insufficient to justify withdrawal of a U.S. division.
Korean Government concurrence was clearly tenuous, thereby also
jeopardizing U.S. congressional approval for support to the 5-year
program.

Porter provided a portrait of the ROK position in a cable dated
June 18, 1970.^^ He said the Korean Government had created and
exploited public dismay over the possibility of a troop reduction
and was "prepared to pull out all stops" to impress the United
States with the depth of its feeling. He also saw the Government's
long-range objective to be minimum withdrawal and maximum
compensation, since Park and his advisers had by now realized that
some withdrawal was inevitable.

The U.S. Embassy in Seoul filed the following account of Korean
press reportage June 19 of an interview with the ROK Ambassador
to the United States, Kim Dong Jo:

I Ambassador indicated that quick withdrawal of U.S. forces might require reap-
ipraisal of ROK troops in Vietnam. Said ROK had never been informed or consulted
either formally or informally about a reduction of U.S. forces in Korea. Said as long
as Vietnam war being fought he did not think U.S. had seriously thought of
reducing forces in Korea.®"

1 Kim Dong Jo's threat was not taken seriously by U.S. policy-
makers. Secretary of Defense Laird commented to the subcommit-
tee that Korea had too good a deal financially to withdraw from
Vietnam.

Honolulu Defense Ministers Conference

By the end of June 1970, Porter and Ranard felt it was time to
get serious with the Koreans about setting a date for the troop
reduction. It was decided that a firm date should be announced
before the annual U.S. -ROK meeting of Defense Ministers so that
it would not appear the Korean Defense Minister had failed to
reverse the U.S. position at the conference.

When the public announcement was made, Prime Minister
Chung II Kwon threatened to resign with his whole Cabinet if the
United States carried out the plan. Chung stated publicly:

We are not against the Nixon Doctrine in principle, but if North Korean Premier
Kim II Sung miscalculates, the South Korean people will wonder if America will
abandon its security treaty or come to our defense.®^

A senior information officer at the Embassy in Seoul reported
that the "Korean officials approached the Honolulu Defense Minis-
ters Conference virtually united by the bonds of apprehension and
dread." He described their concern:

» KI-4, p. 503.
•° KI-4, p. 504.
•' Facts on File. Inc., New York, N.Y., 1970, p. 496.

At the innermost ring of their concern is the fear that the announced American
plan to reduce some troops from the ROK will lead to a total withdrawal, despite
U.S. reassurances that a strong force will remain; that, although the Nixon Admin-
istration wishes to implement a long-term and massive program of modernization
for their armed forces, the American Congress will trim this program so drastically
as to render it meaningless; and that these early moves at troop reduction by the
United States precure [sic] an eventual American desire to retreat from the terms of
the defense security pact between the two countries on which the Koreans have
based nearly everything.*^

The Honolulu conference was held July 21-23. Deputy Defense
Secretary Packard, who led the U.S. delegation, recalled that the
Koreans had three concerns: the threat from North Korea; the
question of whether the modernization program could be imple-
mented quickly enough to compensate for the loss of troops; and
the psychological effect.

Korean Defense Minister Jung Nae Hyuk told Packard he had
been sent to the conference to prevent troop reduction. Donald
Ranard described the meeting as one of the most difficult he had
ever attended. The Koreans wanted to ''paper over" the troop
reduction issue, but the American delegation refused. The Koreans
threatened to replace the American division with ROK troops from
Vietnam. Drafting the joint communique was a prolonged and
painstaking process.

In the end, the American delegation believed it had succeeded in
achieving a formal agreement to U.S. terms and an end to the long
process of consultation, necessary before implementing the troop
reduction decision. The Korean side gave the public a different
impression. The Embassy in Seoul described ROK press coverage as
follows:

(a) troop reduction issue was not settled at conference but will be subject of
further consultations;

(b) conference failed to produce concrete U.S. guarantees of modernization before
reductions;

(c) welcome commitments made by United States in communique. Government-
owned Seoul Sinmun suggested that prior-modernization will be handled at higher
level and urges more forceful ROKG initiatives in anticipation of that event. Only
Seoul Sinmun and pro-government Kyonghyang Sinmun expressed outright dissatis-
faction with conference results, while remainder editorial comments expressed
qualified satisfaction.®^

The Agnew visit

As a result of ROK disappointment over the conference and the
strong U.S. desire to begin the troop reduction, Vice President
Agnew went to Seoul for direct talks with President Park in
August 1970. The Koreans had complained that American officials
had been discourteous in Honolulu. The Agnew visit was designed
to remedy that and to calm President Park by reassuring him that
the United States would not turn its back on Korea and would be
responsive to its security needs. Agnew thought he was chosen to
go partly because he was more hawkish than most administration
officials and therefore might have more credibility.

An aide to Agnew described the meeting with President Park as
"extraordinary." «* Park's behavior was "absolutely offensive," a
performance by a head of state unlike any he had ever witnessed.

« KI-4, p. 505.

*' Declassified State Department cable.

** Subcommittee staff interview.

The meeting, planned to last about an hour, went on for almost 6
hours. No breaks were allowed.

Agnew said that during the meeting he kept emphasizing that
the United States had a system of government that required the
concurrence of both the executive and legislative branches and that
although the President makes foreign policy, it is the role of Con-
gress to decide on appropriations. In Agnew's view. Park did not
understand the role of Congress because Park repeatedly said *'tell
the President" this or that, without any recognition of the preroga-
tives of Congress.

Agnew had emphasized the relationship between Congress and
the executive branch for two reasons: (1) To try to get the adminis-
tration, the State Department, and Ambassador Porter ''off the
hook" for being unable to guarantee the modernization program;
and (2) to let the Koreans know that Congress holds the purse-
strings and that no money can be allocated without its support or
acquiescence.®*

Agnew's aide thought the importance of Congress was overstated:

He surmised probably occurred to the Korean officials that they
were "building up" the wrong group by buttering up Ambassador
Porter and other administration officials.

Ultimately, he said, the Agnew-Park meeting had two important
effects: (1) Washington policymakers were persuaded to slow down
the pace of troop reduction; and (2) the Koreans took advantage of
the delay to work on Congress.

At a press conference prior to his departure, Agnew stated that
he had no problem with removing the 2d Division because all U.S.
forces were to be withdrawn within 5 years anyway. This remark,
unexpected and contrary to the stated U.S. policy, greatly upset
the Koreans. During the summer and fall of 1970, the two Govern-
ments were at loggerheads over the issue.

On August 29, immediately after Agnew's visit, Korean newspa-
pers reported that U.S. troops had already been reduced by
10,000.®® The story was based on an announcement by the Pentagon
that the United States was already 10,000 below the 63,000-person
ceiling. On August 31, Defense Minister Jung Nae Hyuk wrote a
curt letter to Gen. John Michaelis, Commander of U.S./U.N. forces,
asking if the cutback had already taken place, despite Michaelis'
statements to the contrary. Michaelis did not reply until Septem-
ber 28. He then explained the missing 10,000 troops with a detailed
description of attrition rates, reassignments, and had distinctions
between temporary and permanent personnel.

Vice President Agnew's parting remarks and the disclosure of
the lowered U.S. troop count brought Korean concern to a peak.

Covert planning to influence U.S. policy

- While the U.S. Government was under the impression that the
Koreans understood the terms of troop reduction and were reason-
ably pleased with the assurances of the 5-year military moderniza-
tion package, the Korean Government was in fact extremely wor-
ried. By the end of the summer, 1970, it had lost the final round of
negotiations. After the Agnew visit, according to U.S. intelligence.

" Subcommittee staff interview.
** Subcommittee staff interview.

ROK leaders proceeded with plans to take their case directly to
Congress.

Top U.S. officials, including Vice President Agnew and Secretary
of Defense Laird, acknowledged that they and other administration
officials may have overstated the role of Congress. Congressman
Richard Hanna, in a subcommittee interview and before the House
Ethics Committee,^^ admitted that he, too, had counseled the ROK
Government as to the need to approach Congress, not the adminis-
tration, and had described the best methods to do so.

Ambassador Porter testified that by the fall of 1970, the Embassy

was:

making a general evaluation that more and more activity [by Korea] with Congress
seemed to be developing and that there had been approval for what seemed to be a
high-level effort to improve Korean relations inside the Legislative as well as the
executive branch of the Government.^*

Former Defense Secretary Laird recalled that the Koreans ''were
opposing my troop reduction decision" before Congress. He had
detected the effects of Korean lobbying in talks with Members of
Congress by the nature of their questions and comments about
Korea. He also read executive branch reports about the lobbying. It
was clear to Laird that the Koreans were pushing their assessment
of the DPRK threat to justify both a greater amount of money for
modernization and a U.S. troop presence at the original level.
Laird said they were also promoting visits to Korea by Members of
Congress where they could show them the threat from the North.

Dr. Kissinger also recalled the Korean reaction to the troop
reduction decision:

They were extremely concerned. I had sympathy for their point of view. Their
concern was that the reduction of our troops might be considered by * * * the
North Koreans, and by the Chinese * * * as a signal of American lessened interest
in Korea. Coupled with the troop withdrawals we were also undertaking from
Vietnam, they were worried that they might be part of a general retreat of the
United States from Asia, and it created considerable concern on the part of the
Koreans.®^

Although Kissinger stated he did not have direct knowledge of
Korean lobbying, he did recall hearing about it from Defense Secre-
tary Laird:

I was aware there was Korean lobbying going on, and I must say I was aware that
other lobbying was going on on the Hill, and so was every Congressman. In connec-
tion with the troop withdrawals. Secretary Laird came to me and told me that there
was some lobbying effort to get him to reverse the decision or to get Congress to
reverse the decision that the President had made to withdraw that division.'"

By the end of 1970, Korean opposition to the troop reduction had
subsided, partly as a result of congressional approval in December
of a large loan for the construction of an M-16 rifle factory in
Korea.^^ In February 1971, the two countries announced that agree-
ment had been reached on the conditions for the reduction of U.S.
forces and modernization of ROK forces.

At that time, the U.S. Government was not inclined to reduce
the troop level beyond 20,000, notwithstanding Laird's support for

*' Subcommittee staff interview; Korean Influence Investigation, Part 2, hearings before the
Committee on Standards of Official Conduct, 95th Cong., 1st sess., Apr. 3, 4, 5, 10, and 11, 1978, pp.
235-236.

" KI-4, p. 54.

" KI-4, p. 239.

'" KI-4, p. 246.

" See "ROK Defense Production and Korean Self Sufficiency," in this section, pp. 77-78.

further cuts. The prevailing view was evident in a letter from
Acting Secretary of State U. Alexis Johnson to Deputy Secretary of
Defense Packard on August 28, 1970:

It is essential that we allow the after effects of the first withdrawal to settle down
and for the modernization program to take hold both militarily and psychologically,
in both parts of Korea and in Japan. ^^

On March 27, 1971, the reduction of 20,000 troops was complet-
ed." A ceremony was held in which the colors of the 7th U.S. Army
Division were retired, ending a difficult year of negotiations.
Korean fears, however, grew over the next few years as the Gov-
ernment looked for the annual congressional appropriations that
were to fulfill the modernization program.

The modernization program in Congress

The objective of the military modernization program was eventu-
al military self-sufficiency for South Korea.'* To achieve this, the
Nixon administration considered it essential that Congress appro-
priate that full request of $1.5 billion over the specified 5-year
period.'^ Congress, however, viewed the program as part of the
annual security assistance legislation, and not as a 5-year package.
As such, appropriations were affected by the political currents in
the United States in any given year. During that period, a number
of factors did arise that affected congressional willingness to appro-
priate the funds. For example, there were overall cuts in military
assistance, which led to proportionate cuts for Korea.

An additional problem, from Korea's perspective, was that Con-
gress changed the nature of military assistance to all countries
from direct grants to direct sales of military equipment, with credit
arrangements to be provided through Foreign Military Credit Sales
(FMS) as necessary. The Korean Government believed that the
modernization plan had been predicated on grant assistance; now it
was being asked to shoulder a large portion of the defense burden
through purchases or credit arrangements.

The ROK had also assumed that modernization assistance would
be in addition to the regular military aid of approximately $140
million in yearly grants. This was not to be the case, and the
annual amount for the program remained a matter of some conten-
tion between the two countries.

The modernization plan was presented to Congress in the fall of
1970 as a $150 million supplemental appropriation to the Security
Assistance Act of that year, the first step in the modernization
program. It was emphasized that the funds would enable the
United States to reduce ground forces in Korea by 20,000 in 1971,
something very important to Congress at the time. Congress consid-
ered and approved this first allotment much as it did other foreign
aid. However, it did not see the program as an irrevocable 5-year

" Declassified State Department document.

"Joint ROK-U.S. communique, Feb. 7, 1971.

'* The ROK Government proposal for modernization of its forces was submitted to the admin-
istration at the same time the United States was calculating the dollar amount for the modern-
ization plan. The Korean figure was $3-$4 billion over 5 years, whereas the first American
figure was $1 billion, which was shortly revised to $1.5 billion over a 5-year period.

" For excerpts from congressional debates, statements, and hearings pertaining to security
assistance legislation between 1969 and 1976, see Library of Congress, Congressional Research
Service compilation, appendix C-20.

commitment, nor had the administration provided details on the
program beyond the first year.

In May 1971, shortly after the announcement that President
Nixon would visit Peking, North Korea proposed that it and the
ROK enter into a political dialogue. The unprecedented talks were
followed by events which hampered full funding of portions of the
modernization plan. As a result of the negotiations, President Park
announced in the fall of 1972 that the ROK needed a new constitu-
tion in order to strengthen its negotiating position. By December
1972, Park had instituted the Yushin constitution which virtually
guaranteed him lifetime Presidency, while severely restricting the
civil rights of Korean citizens. This led to the most serious cut in
Korean modernization assistance.

In 1974, Congress legislated a specific limitation on funds for
Korea because of Park Chung Hee's worsening record on human
rights.

In the only case in which Congress ever singled out South Korea
for a military aid cut, $93 million was subtracted from the pro-
posed amount, with a provision that an additional $20 million
would be made available if the President of the United States were
to certify that the observance of international human rights had
improved substantially. The President did not so certify. The
amendment to reduce military aid, introduced by Congressman
Donald M. Fraser, was a result of hearings on human rights in
South Korea conducted jointly by the Subcommittee on Interna-
tional Organizations and the Subcommittee on Asian and Pacific
Affairs. ROK Government anxiety over the aid reduction and the
hearings could be seen on Capitol Hill in the accelerated lobbying
activities of Tongsun Park and Korean embassy officials.

Year-by-year funding of the military modernization program is
shown in the following table:

SECURITY ASSISTANCE FOR FISCAL YEARS 1971-77 TO THE REPUBLIC OF KOREA
[In millions of dollars]

Military assistance

program— grant

assistance

Foreign military

sales— sales

on credit terms

Excess defense

articles— grants

of equipment

Requested ' Actual '

Requested

Actual

Requested Actual

Fiscal year:

1971

290.8 291.2

239.4 155.5

215.7 149.6

263.7 94.1

161.5 82.6

76.7 62.4

. . l^ 15

10.0
15.0
25.0
25.0
52.0

126.0
1.5

275.0

15.0 ..

17.0

24.2

56.7

59.0
126.0
134.1 .
152.4 ..

137.7

1972

1973

1974

1975

1976

Transition quarter ^.

40.0 227.8
33.6 29.7
43.0 17.7
20.8 3.1
25.0 .2

1977

11.0 2.6

* As requested by the administration; actual amounts provided to the ROK.

2 In fiscal year 1976, the end of the fiscal year was changed from June 30 to Sept. 30. The second set of figures refers to the
transition quarter running from July 1, 1977, to Sept. 30, 19/7.
Source: Library of Congress.

It was not until 1977 that Congress fulfilled the administration's
modernization commitment, 2 years after the scheduled completion
date. The ROK Government complained about the delay, the

amount of nongrant aid, and a dollar amount lower than the $3
billion to $4 billion it had desired. Congress had also linked the
human rights issue to military assistance levels (something the
administration had opposed).

Neither the administration nor Congress favored further troop
reductions until the modernization program was completed. How-
ever, each year the Korean Government grew increasingly nervous
as it perceived the assistance level to be diminishing, and it there-
fore attempted to exert greater influence over the decisions of
Congress. The lobbying was a reaction to what it saw as a poor
legislative record with respect to its interests and a relative indif-
ference on the part of the administration. The ROK efforts were
aimed at maximizing U.S. assistance and minimizing the effects of
the new Yushin system on American public opinion and policymak-
ing.'^^

Carter troop reduction

The planners of the 1971 troop reduction had contemplaud a
second reduction, to take place as early as 1978. However, the
modernization plan caused a postponement, as noted. It was not
until Jimmy Carter's Presidency that further reductions became
policy. While campaigning in June 1976, he had called for the
withdrawal of all ground troops "on a phased basis over a time
span to be determined after consultations with both South Korea
and Japan." "

In the next sentence of his speech he put human rights into the
troop withdrawal equation: "At the same time [as the troop reduc-
tion], it should be made clear to the South Korean Government
that its internal oppression is repugnant to our people and under-
mines the support for our commitment there."

Congressional opposition to dictatorial government in South
Korea had already slowed the 5-year military modernization pro-
gram by cutting military assistance. Carter reinforced this attitude
by linking troop withdrawal and human rights himself. Relations
between the two countries were further complicated by the public
disclosures in 1976 about Korean influence-buying.

The Carter admininstration's position on troop withdrawal was
articulated in a Presidential Review Memorandum dated May 5,
1977. It called for a phased withdrawal in three stages: In the first,
one brigade would be removed — by the end of 1978; in the second
stage, the support troops; and in the third, the last combat brigades
and U.S. headquarters. While Carter's campaign pledge had called
for total withdrawal of ground forces by 1980, the memorandum
gave 1982 as the new date.

The ROK Government was informed of the administration's
intent on March 9, 1977. In July 1977, Secretary of Defense Harold
Brown and Minister of National Defense Suh Jyong Chul met in
Seoul for the 10th Annual Defense Ministers Conference. Discus-
sion of troop withdrawal took place without the acrimony of 1970,
partly because the United States accepted the principle that "com-

'^See, "Part B: Review of Korean-American Relations," p. 41, and "Part C-V: Educational
Informational, and Cultural Activities," pp. 301-308.
" Address by President Jimmy Carter before the Foreign Policy Association, June 1976.

pensatory measures will be implemented in advance of or in paral-
lel with the withdrawal." ''^

Impact of congressional investigations

In the fall of 1977, the congressional mood was not conducive to
Carter's policy due principally to three issues. First was opposition
to total withdrawal of ground troops. Second was congressional
indignation over the lack of cooperation from the ROK Govern-
ment with the investigations of the scandals. The third (less promi-
nent than the first two) was South Korea's human rights record.

The Korean Government's unwillingness to make Tongsun Park
and former Ambassador Kim Dong Jo available for questioning by
Congress in connection with the investigations had heightened an-
tagonism to the point that in November 1977 the House Committee
on International Relations declined to consider the administra-
tion's request for authority to transfer armaments worth $800 mil-
lion in a new modernization program for Korea. The armaments
were to come from the 2d U.S. division in connection with the
withdrawal of that division. At the end of December, the United
States and South Korea reached an agreement whereby testimony
was obtained from Tongsun Park under a grant of immunity. How-
ever, the House Ethics Committee, after interrogating Park, insist-
ed that it could not conduct a complete investigation of alleged
payoffs to Congressmen unless former Ambassador Kim Dong Jo
could also be questioned. The State Department and the ROK
Government took the position that Kim was protected by diplomat-
ic immunity. The House, over the objections of the Carter adminis-
tration, voted on May 31, 1978, to cut off nonmilitary assistance to
South Korea if Ambassador Kim should refuse to provide the infor-
mation necessary for the investigation.

Thus, administration plans were impeded by congressional action
aimed at obtaining cooperation from the Korean Government in
the investigations of the scandals. Congressman Les Aspin saw a
paradox in Congress position on troop withdrawal:

Congress considers the presence of United States troops primary in terms of
United States defense interests, but considers military aid to South Korea in terms
of many other factors. Thus, because the Administration says it cannot remove
United States troops without an improvement in the South Korean forces the
Korean scandal in Congress may be the main factor in keeping United States troops
there.'"

The Carter plan

In 1978, hearings were held in the House and Senate to consider
the administration's rationale and timing for the proposed troop
withdrawal. Secretary of Defense Brown, in a prepared statement
before the House International Relations Committee, asked "why
have we [U.S.] maintained ground forces in Korea for so long?" and
then commented:

We did not reduce our forces further in the 1970's because of the uncertainties
and tension in the area generated by the war in Vietnam and the subsequent U.S.
disengagement, even though improving conditions in South Korea might have war-

" Joint ROK-U.S. communique, July 26, 1927; see appendix C-19.

^» "Withdrawal of American Forces Still a Sticky Issue," The New York Times, Feb. 26, 1978.

ranted further shifts in responsibilities. Because we are deeply committed to peace
on the peninsula we have been prudent.*"

Brown noted the changes in attitude of the communist superpow-
ers after Vietnam, stating:

Growing Soviet and Chinese military capabilities in East Asia are largely directed
toward each other, absorbed in mutual hostility. Neither has been able to transform
military power into significant political advantage in East Asia. The U.S. relation-
ship with China has also been transformed, with both sides recognizing the value of
stable ties with each other. Neither the Soviet Union nor China has any incentive to
encourage or underwrite military adventures in the Korean peninsula.*^

At a hearing of the Manpower and Personnel Subcommittee of
the Senate Armed Services Committee in February 1978, Morton I.
Abramowitz, Deputy Assistant Secretary of Defense, gave as a
reason for further reductions the increased stability of the Korean
Peninsula, the result of the improved capabilities of ROK ground
forces.

If you have a situation in which the South Koreans can on their own defend
against the North Koreans, you have basically a more stable deterrence when they
don't have to depend on foreign powers as decisively as they have. They reached a
situation where they can handle the ground role themselves."

Abramowitz added that the ROK was now on a more equal
footing with the DPRK, which did not need to rely on its allies'
presence to conduct warfare. The removal of ground troops was
seen by administration witnesses as increasing the likelihood of
negotiations and better relations between the two Koreas.

However, Senator Sam Nunn, the subcommittee chairman, con-
cluded that although the administration's ''principal reasons given
for the withdrawal of ground forces were twofold — to save money
and to reduce the risk of automatic U.S. involvement in a Korean
conflict," neither objective would be met.®^

The matter of the Korean investigations was also brought up in
the February hearings. Both Secretary Brown and Deputy Assist-
ant Secretary Abramowitz emphasized that Congress needed to
separate long-term U.S. interests from the Korean scandal.

In the end, notwithstanding the debate over the rationale for the
reduction or the investigations. Congress did approve President
Carter's security assistance package for Korea, thereby allowing
troop withdrawals to proceed. Although the human rights problem
had been a substantial concern both to certain Members of Con-
gress and the administration, ultimately it had less impact on
security relations than did the Korean scandals or congressional
doubts over the desirability of troop withdrawal. However, it was
apparently instrumental in obtaining the release, during 1977, of a
number of South Koreans who had been jailed for anti-Park Chung
Hee activities. President Carter has expressed concern over human
rights directly to Korean leaders, and U.S. diplomats have made
frequent representations on human rights to the ROK Govern-
ment.

*" Statement of Hon. Harold Brown, House International Relations Committee, foreign assist-
ance legislation for fiscal year 1979, pt. 1, Feb. 22, 1978, p. 73.

*' Ibid., Brown statement, p. 73.

** Testimony of Morton I. Abramowitz, Deputy Assistant Secretary of Defense, Subcommittee
on Manpower and Personnel, Senate Armed Forces Committee, Feb. 24, 1978, p. 1844.

" Congressional Record, Senate, May 15, 1978, p. S7875.

Defense industries in Korea

One consequence of the withdrawal was the need for South
Korea to improve its defense production capability, something it
greatly desired. The House Armed Services Committee had noted
in a report that:

Historically, the United States had discouraged development of defense industries

in South Korea because of a concern over the capability to successfully attack the

" lyed { "

military growth and capabilities of North and South Korea. The consequences of

North. While that concern no longer exists, it has played a role in the asymmetrical

this policy have become acutely apparent since the United States has proposed the
total withdrawal of its ground forces from Korea."

In the 1970's, the United States had apparently come to endorse
a policy of promoting Korean defense industries. Abramowitz told
the Senate committee that the ROK had to play ''catchup ball"
with the DPRK with respect to military production. The United
States took a number of steps to implement this policy, approving
additional production licenses, permitting the manufacture of cer-
tain armaments in addition to the M-16 rifles, and authorizing
exports of some Korean-produced defense materiel based on U.S.
technology. However, the United States maintained restrictions on
the production and export of certain armaments and discouraged
Korea from developing a capability in some areas such as nuclear
weaponry. Korea sought to implement its own policy by looking
elsewhere for technology and sources of armaments and by trying
to ignore or circumvent the terms of agreements with the U.S.
Government and U.S. defense contractors. (These and other issues
related to Korean defense industries are discussed in greater detail
in the subsection following the conclusions to this subsection.)

CONCLUSIONS

Security concerns were central to Korean-American relations be-
tween 1965 and 1978. However, for the United States, the late
1960's were dominated by the Vietnam war, while for Korea the
principal concern was North Korea. The United States tended to
view developments on the Korean Peninsula within a global con-
text, the ROK in terms of a North-South confrontation. These
differing perspectives often led to differing and at times conflicting
responses to issues that arose in the 1960's and 1970's. To the Park
Government, American responses to North Korean operations were
inadequate; to American officials, the South Koreans were exagger-
ating the threat, sometimes for political purposes. They also led
both countries to anticipate reactions that were not forthcoming
and to misinterpret the implications of domestic events in one
another's country.

A major factor in relations between the two countries in the
1960's and 1970's was the Vietnam war. Negotiations over Korean
participation revealed the best and the worst in U.S.-ROK rela-
tions. U.S. policy in Vietnam in the mid to late 1960's called for
heavy allied involvement and the ROK became the strongest U.S.
ally with the U.S. reciprocating with substantial compensatory
assistance. However, in 1969, the United States, under President
Nixon, adopted a new pan-Asian policy, the Guam doctrine, to

"House Armed Services Ck)mmitte€, "Review of the Policy Decision To Withdraw U.S.
Ground Forces From Korea," p. 15.

rationalize withdrawal from Vietnam and reduce the potential for
future U.S. involvement in Asian ground wars. Although concerned
over the new policy, South Korea did not react strenuously until
the summer of 1970. Then the announcement that 20,000 U.S.
troops would be withdrawn brought the Guam doctrine directly
home. Until that point Korea had believed that its ''special rela-
tionship" with the United States exempted it from the doctrine.
South Korea, in turn, took action to protect its self-interests, and
increasingly the two countries found themselves in conflict over
many issues and mistrustful of one another's intentions.

Further, while the United States had given repeated assurances
of its commitment to ROK security throughout the late 1960's,
typically these took the form of offers of increased economic and
military assistance that it could not guarantee, since appropri-
ations were the prerogative of Congress. Congress, in turn, was
influenced by a highly politicized American public, which at that
time was reconsidering the desirability of military involvement
abroad.

The Park Government, believing that U.S. commitment to ROK
security and anticommunism in general was eroding, took extraor-
dinary steps — legal and extralegal — to influence U.S. policy. Effec-
tive measures were not taken to halt or prevent the influence
activities, apparently because of possible adverse consequences to
Korean participation in the Vietnam war.

The situation grew more complicated when Congress failed to
fulfill the Nixon administration's promise of $1.5 billion in compen-
satory assistance within the promised 5-year period. This was due
to cuts in military assistance appropriations worldwide and other
factors such as opposition to Park Chung Hee's human rights
record.

In 1972, President Park restructured the Government and im-
posed the Yushin Constitution, making his rule much more au-
thoritarian. He justified the new system on the grounds that direct
negotiations between North and South Korea necessitated tighter
internal control. Criticism of the Yushin system in Congress and
the American press was the cause for stepping up the influence
campaign, particularly in reaction to congressional hearings on
human rights and the reduction in military assistance.

As Korea observed the changes in American policy toward Asia
and saw the possibility of future troop reductions, it became deter-
mined to work toward self-sufficiency in developing its own defense
industry. The Carter administration took a favorable view of this
because it complemented the goal of withdrawing all U.S. ground
troops. Unlike the case with 1971 troop reduction, the United
States in this instance pledged compensatory assistance to modern-
ize ROK forces prior to or simultaneous with troop withdrawal.
Further, total withdrawal was hindered by congressional opposition
and by problems between the countries over the investigations of
influence buying. Finally, there were limits to U.S. encouragement
of ROK self-sufficiency, and these the Korean Government tried to
circumvent.

Clearly, the context of Korean-American security relations had
changed dramatically in the last decade. Korean dependence on the
United States is now considerably diminished, and the U.S. posi-

tion in Asia is based more on treaty commitments than deployment
of ground troops. As a result, the United States has lost some
ability to influence the Korean human rights situation and defense
policy.

SPECIAL ISSUES: ROK DEFENSE PRODUCTION AND MILITARY SELF-
SUFFICIENCY

The development of Korea's capability to support its defense was
a major issue in Korean-American relations, not only in terms of
military stategy, but in relation to economic development. At first,
the United States discouraged defense production as a means of
achieving self-sufficiency, but by the late 1960's and early 1970's,
with the growth of the Korean economy and in line with the
proposed troop withdrawal, the policy shifted toward favoring ex-
pansion of certain defense industries. Consideration was even given
to Korea's becoming an arms exporter. However, overall the
United States approached the matter with caution, opposing the
development of some defense industries, the introduction of certain
weapons systems into Korea, and the export of some military hard-
ware. The Korean Government, on the other hand, was strongly
committed to a rapid expansion of defense production, independent
of and sometimes in conflict with U.S. interests and policy.

The importance of this area in Korean-American relations led
the subcommittee to include it as a special study area in its investi-
gation. The focus was principally on U.S. policy toward Korean
self-sufficiency and Korean efforts to diversify its sources of supply,
acquire its own defense plant and production capability, and
become an arms exporter.

Korean defense plant and production capability

In the early 1960's, the United States discouraged the growth of
a full range of Korean defense industries, urging production of
consumable military items rather than up-to-date military hard-
ware. Overall, the United States sought to maintain Korea's reli-
ance on the United States for armaments and for a major part of
the Korean defense budget.

While the Park administrations clearly wanted and needed U.S.
military assistance, they were determined to pursue military self-
sufficiency, in some instances assessing their own needs indepen-
dently of the United States. For example, in late 1965 or early
1966, Mickey Kim (Kim Un Yong),*^ a KCIA officer serving as a
counselor at the South Korean mission to the United Nations,
informed Paul Benke of Colt Industries that his Government
wanted to build a gun factory.^^ At Kim's invitation, Benke met
with President Park Chung Hee, who told him that the Korean
Government would purchase a certain number of rifles from Colt if
Colt, in return, would help build a rifle plant in Korea.

No agreement was reached at this time. Benke replied that Colt
would be willing to sell the rifles but would not build the plant
because Colt could supply the rifles from its own facilities in Hart-

"Kim Un Yong was involved in a number of activities significant to Korean-American
relations and is mentioned at various points in this report.
•• Subcommittee staff interview with Paul Benke, June 21, 1978.

ford, Conn. Benke explained to the subcommittee that Colt's posi-
tion had been supported by the Departments of State and Defense.

In April 1968, at the height of tensions between the North and
South, the Korean Government apparently authorized open tenders
in the world market for an ammunition as well as a rifle factory.*^
This was another indication of its determination to push ahead
with development of defense industries irrespective of U.S. assist-
ance or policy.®®

By 1968, the State Department was itself beginning to reassess
policy toward Korean military self-sufflciency and defense produc-
tion. In that year. State Department officials recommended that
the U.S. Government back the rifle plant. The project was charac-
terized as deserving "our [U.S.] most sympathetic consideration,"
with the importance of the project to ''developing [Korean] defense
industries and reducing MAP [Military Assistance Program]" ®^
being noted. These officials also emphasized the importance of the
rifle plant in the context of long-term plans for troop withdrawal.

In discussing the development of a defense capability, which
would require the participation of U.S. defense contractors, several
obstacles were noted. For example, it was presumed that U.S.
investors would be reluctant to proceed without investment guar-
antees.

The subcommittee found that there were other reasons for reluc-
tance by U.S. defense contractors. According to officials of Colt
Industries knowledgeable about the M-16 negotiations, the compa-
ny's concerns were heightened by the terms the Korean Govern-
ment was demanding. It wanted to manufacture everything con-
nected with the M-16, from springs to barrels and magazines. Even
Colt did not have this capability. To meet it, Colt would have had
to subcontract with dozens of other manufacturers. Colt's suppliers
in turn feared that offering a technical data package to the Kore-
ans would expose them to the possibility of leaks to Japanese and
other U.S. competitors.*®

Despite consideration of a change in policy, comments by State
Department officials in 1968 revealed that no firm decision had
been reached. These officials argued that if developing an arms
industry in South Korea proved feasible politically and economical-
ly, the United States might obtain the extra benefit of getting the
Koreans to look more realistically at their military requirements.
They cautioned, however, that the United States would need to
weigh carefully how much capability to give the ROK in that
direction.

By 1969, however, the United States was clearly changing its
position. According to Colt officials, the Departments of State and
Defense pressured the company into accepting the rifle project. In
June 1969, following the U.S.-ROK Defense Ministers Conference,

'^ Letter from Fritz-Werner Industrie-Ausrustungen GmbH to Tongsun Park, Apr. 5, 1968;
Letter from Heckler & Koch GmbH to Tongsun Park, Apr. 10, 1968. The Korean Government
was also in the market for "fast boats" as early as 1968; see letter from Lang Yacht Ck)., Inc. to
Tongsun Park, May 6, 1968 and letter from Merex Corp. to Tongsun Park, Dec. 8, 1969. These
documents appear in appendix C-23.

••It is possible, however, that the Korean Government sought out other foreign suppliers in
order to have some leverage over the United States when negotiating for U.S. assistance with
regard to the ammunition, rifle, and "fast boat" production facilities.

*• Declassified excerpt of classified Department of State document.

•" Subcommittee staff interview" with Paul Gubbins, Stewart Plettner and Hadwen Stone, May
23, 1978.

Deputy Secretary of Defense David Packard was quoted as ''autho-
rizing South Korea to build U.S. M-16 rifles on license." »^ Since
Colt held the patents for the M-16, Packard's announcement repre-
sented a commitment to the Korean Government of Colt's partici-
pation—prior to any formal agreement with Colt— and put pres-
sure on Colt to come to terms.

When the negotiations between Colt and the Korean Govern-
ment subsequently broke off over some of the above points, the
Department of Defense, Colt's primary customer, resorted to more
direct pressure. It threatened to turn the project over to the manu-
facturer of another rifle. As relations between Colt and the Depart-
ment became increasingly adversarial, Packard sent Colt a letter
instructing it to ''get moving and help the Koreans build their
plant."»2

It should be noted that throughout the 1960's there had been
discussions about modernization of Korean forces, especially as a
result of the Korean commitment to deploy troops in Vietnam in
November 1965 and the Johnson-Park meetings in Honolulu in
April 1968.^3 Nevertheless, such a policy was slow to emerge, and
there was a substantial time lag between the beginning of Colt
Industries' negotiations with the Korean Government on the one
hand, and the eventual decision to broaden U.S. assistance in the
development of Korea's defense industries on the other.

Evidence gathered during the subcommittee's investigation indi-
cated that the reason was caution. The U.S. Government was not
confident that the Korean Government was capable of realistically
assessing its own military needs, it was concerned that the Korean
economy not expand too rapidly, and there was fear that elements
in the South Korean Government would use an expanded military
production capability to attack North Korea.^* Thus U.S. policy had
been to provide for consumable military items but not to build up
basic levels of armaments or Korean defense industries.®^

Former officials of the U.S. Embassy in Seoul told the subcom-
mittee that part of the reason for the shift in policy was South
Korea's ultimate restraint in reacting to the Blue House raid of
January 1968. The Government had not "gone north" despite mas-
sive provocation. The executive branch concluded that the ROK
probably would not attack the DPRK except in an extreme nation-
al emergency.®*

By 1970 the development of South Korean self-sufficiency in the
production of defense materiel had essentially become the formal
policy of the United States. It was at the heart of the military
modernization program begun that year. From 1971 to 1978, the
U.S. supported Korean production of high-speed coastal patrol and
interdiction craft ("fast boats"), model 500 helicopters, conversion
of M-48 tanks, M-60 machineguns, surface-to-surface missiles, and
the M-16. However, there was no blanket endorsement of Korean
defense production. For example, though the Korean Government
was interested in producing fighter aircraft, as of November 1978

»> "International Market Report," June 19, 1969, p. A-93; see appendix C-24.

" Subcommittee staff interview with Paul Benke, June 21, 1978.

" See "Part C-I: Security and Political Affairs," pp. 57-58.

»* Subcommittee staff interview, July 18, 1978.

•» Subcommittee staff interview, July 18, 1978.

'^Ibid.; see also, "Part C-I: Security and Political Affairs," pp. 54-55.

the State Department and the Defense Department had not ap-
proved that request.®^

As it had in the 1960's, the Korean Government continued to
push hard to develop a broad range of defense industries, in con-
junction with or independent of the U.S. Government, as circum-
stances required. It established two defense agencies in late 1970,
around the time of the announcement of U.S. troop withdrawal:^®
the Agency for Defense Development (ADD) and the Weapons Ex-
ploitation Committee (WEC). The ADD openly conducts military
research and development of weapons, weapons systems, equip-
ment, and materiel for the Korean military and assists in the
development of technology in the area of defense industries. Be-
tween 1973 and 1975, the ADD more than doubled its manpower
and budget. It plays an important role in designing and testing
prototypical munitions under consideration for production in
Korea. The WEC, on the other hand, was a covert, ad hoc govern-
mental committee responsible to the Blue House for weapons pro-
curement and production. Oh Won Chul, Second Secretary for Eco-
nomic Affairs, and other high-ranking Blue House officials were
among the participants.

Little is known about the activities of the WEC. Allegedly, WEC
members made a trip to weapons plants in Norway, France, Swit-
zerland, and Israel in 1972 to survey production facilities and dis-
cuss weapons production problems. In Israel, WEC members were
said to have been house guests of Shoul Eisenberg.®^ In the fall of
1972, KCIA Director Lee Hu Rak had instructed the WEC to begin
procurement of the Israeli-made Gabriel surface-to-surface missile
which Eisenberg was attempting to sell to Korea. This was done
despite objections by the U.S. military that the missile system
would endanger portions of the U.S. military assistance program
and objections by the Korean military that the Gabriel was a
second-rate system whose procurement would cause a strong nega-
tive reaction by the United States. (The United States had previ-
ously turned down a request to provide an alternative missile
system.)

Reportedly, the U.S. military did not believe the Korean Govern-
ment would proceed with procurement of the Gabriel, given the
likelihood of a negative U.S. response. However, apparently the
U.S. revised its assessment and decided to provide U.S. technology
for a missile system. On September 27, 1978, the Korean Govern-
ment announced that it had successfully tested its first Korean-
produced surface-to-surface missile, a modified Nike-Hercules.^*^

Nothing seemed to indicate more clearly the growing degree of
Korean independence from the United States in the 1970's in the
area of defense planning and production than Korean nuclear
policy. The executive branch considers this matter so sensitive that
despite repeated requests for information, the Department of State

"^Humphrey-Glenn report, "U.S. Troop Withdrawal from the Republic of Korea," Senate
Committee on Foreign Relations. Jan. 9, 1978, p. 53; Foreign Broadcast Information Service,
Aug. 31, 1978, p. E-1; see appendixes C-50 and C-51 respectively.

•• Subcommittee staff interview, Aug. 16, 1978.

•' See Problems of Political Funding and U.S. Trade and Investment in Korea, in "Part C-IV:
Economic Relations," pp. 228, 238," 251.

'"» Washington Post, Sept. 28, 1978; for the Korean Government assessment of this develop-
ment, see the editorial "Development of Missiles," Korea Hereild, Sept. 28, 1978, p. 4.

was not forthcoming.^®^ The subcommittee's concern over the
matter stemmed from the apparent fact that the Korean Govern-
ment did not discuss with or notify the United States in advance of
any step it took to develop a nuclear weapons capability.

There are indications that in the early 1970's, some steps were
taken which appeared designed to pave the way for a ROK nuclear
weapons program. Specifics on this matter came from a subcommit-
tee staff interview (on February 28, 1978) with a former high-
ranking Korean Government official who was a member of the
WEC. He told the subcommittee that the WEC voted unanimously
to proceed with the development of nuclear weapons. Subsequently,
the Korean Government discussed purchase of a nuclear fuel repro-
cessing facility from France and a mixed-oxide fuel reprocessing
lab from Belgium. The explosion of an Indian nuclear device in
April 1974 using fissionable material produced with the assistance
of a Canadian NRX research reactor led to greater caution by
nuclear technology suppliers, however, and the Belgians and the
Canadians withdrew offers for certain technology. Negotiations be-
tween the ROK and France continued for some time over a repro-
cessing facility. Ultimately, it appears that by some time in 1975,
any ROK nuclear weapons program had been canceled and the
negotiations for purchase of a fuel reprocessing facility also ended.

With Korean nuclear policy therefore clarified, the United States
actively cooperated in the expanding ROK nuclear power program
and agreed to sell U.S. commercial power reactors in a process
which ostensibly has improved both the form and the substance of
the energy relationship with the Korean Government.

The above incident indicates that even in an area of strong
concern to the United States, one which involved the security
interests of the entire region and the negotiations by the United
States with other major powers over disarmament, the Korean
Government was apparently willing to pursue an independent
course of action.

While diplomatic efforts in 1974 were successful in containing
Korea's independent steps toward production of nuclear weapons,
similar steps in the area of conventional weaponry went un-
checked. There were signs in 1976 that the Korean Government
was continuing its unilateral efforts to seek other sources of assist-
ance for expanding its procurement and production capability of
conventional weapons. A little more than 1 month after Tongsun
Park left the United States for London in October 1976, he told an
international arms merchant with Interarms ^^^ that he was in the
process of ''organizing a military buying and selling office in
London for the Korean Government. ^^^^ Park ''outlined the new
Korean policy to try to become more independent on their arms

"" This was despite the fact that one of the issues which the subcommittee was investigating
involved an alleged leak of classified State Department information on nuclear matters to a
Korean national. The subcommittee has referred this matter to appropriate agencies and
committees in the executive branch and the Congress.

'" This was not Park's first initiative in the area of arms production and sales. In addition to
his previously cited activities concerning production facilities sought by the Korean Govern-
ment, Park had attempted unsuccessfully in 1969 to purchase a wide range of foreign surplus
munitions items from Merex Corp., using the Korean Embassy for logistical support. Subcom-
mittee staff interview, June 9, 1978; subcommittee staff interview with Tongsun Park, June 5,
1978. See letter from Merex Corp. to Tongsun Park, Dec. 8, 1969, appendix C-26.

'»» Interoffice memorandum from Interarms Manchester to Interarms Virginia, Dec. 6, 1976,
appendix C-27.

procurement" than before. Park further indicated that he was
approaching Interarms because of the Korean Government's per-
ceived need for "proper international advice regarding both pro-
curement and disposal of their surplus."

By 1978, the degree to which other nations had taken notice of
Korea's new procurement policy was demonstrated when France
singled out the Republic of Korea as a potential buyer of its entire
stock of Honest John surface-to-surface missiles. ^°'* More generally,
as noted in the January 1978 Humphrey-Glenn report on U.S.
troop withdrawal, "the South Koreans have been discussing possi-
ble purchases of rifle grenades, antitank weapons, multiple rocket
launchers, ship-to-ship missiles, air defense missiles, armored per-
sonnel carriers, and tanks with other governments."^®*
I Another incident connected with the development of defense in-
! dustries illustrated the sometimes less than straightforward ap-
proach of the Korean Government in dealing with the United
States over defense issues. In November 1977, Colt cabled the
Korean Ministry of National Defense to ask with whom to negoti-
ate a pending contract extension. Five days later, Colt received a
cable from Tong II Industries Co.^°^ requesting a meeting to discuss
the M-16. Tong II is a Korean defense contractor owned by the
Unification Church. No reply had been received from the Ministry
itself. Colt cabled back agreeing to a meeting in Hartford and
asking with whom they would be negotiating. Tong Il's reply noted
"we need some more days to send our representative to you, in
order to precoordinate it with our Government. Upon completing
; coordination, we will notify you about 'who and when' of our side
to discuss with you." Another Tong II cable, sent a week later on
November 28, 1977, stated: "Our President will visit your company,
from December 12 to 16, 1977, to discuss M-16 contract extension."
Moon Sung Kyun ^°' and another Tong II official did visit Colt in
December 1977. That they were officially representing the Korean
Government could be inferred from the fact that Colt never re-
ceived any reply from the Ministry of National Defense, while
Tong II clearly stated in its cable that it was coordinating its visit
with the Korean Government and was prepared to negotiate the
contract between the Government and Colt. Moreover, at the meet-
ing with Colt in December, Tong Il's representatives gave an am-
biguous respose to the question of whether they were formally
representing their Government: "if you ask the Ministry of Nation-
al Defense, they will say no."

Arms exports

Repeatedly, the Korean Government requested of the United
States approval to export munitions, showing little apparent under-
standing of the foreign policy concerns, including human rights,
which underlie U.S. efforts to limit arms exports around the world.
The issue became a problem between the two countries.

'°*See the note typewritten on copy of letter from Samuel Cummings to Robert J. Conkling, Feb.
13, 1978, see appendix C-47.

"* Op. cit., Humohrey-Glenn reoort, p. 55.

"*«The various Colt-Tong II cables appear in appendixes C-38, C-39, C-41— C-45.

'<" Moon Sung Kyun is the second cousin of Sun Myung Moon, the head of the Moon
Organization, See "Moon Organization" in "Part C-V: Educational, Informational, and Cultural
Activities." pp. 367-368.

The subcommittee looked into several aspects of this issue: The
ambiguity of the U.S. position over arms exports; the Korean Gov-
ernment's method of pursuing exports; and allegations of illegal
exports.

With respect to exports, according to U.S. law, any country wish-
ing to export U.S.-supplied weaponry or weapons-related technol-
ogy must get prior approval from the Department of State. To
receive approval, the request must be consistent with the Arms
Export Control Act ^°® and other legislative and policy guidelines
reflected in the International Traffic in Arms Regulations ^^^ issued
by the State Department. The Arms Export Control Act states
clearly the responsibility of the United States to exercise control
over the ultimate disposition of the defense articles and services it
supplies, ^^° and the subcommittee was confident that the Office of
Munitions Control and the Bureau of Politico-Military Affairs were
committed to their responsibilities in this regard. However, the
State Department can exercise control only over those items sup-
plied by the United States. As noted, in addition to trying to
increase exports of U.S. weapons, the Korean Government acted to
increase purchases from other governments.

Just as U.S. policy toward the development of a Korean defense
production capability was ambiguous, so was its policy toward arms
exports. In 1968, State Department officials had also begun to
consider encouraging Korean exports, including the possibility that
the ROK might even perform a "regional arms supply role."

While no formal policy was established at the time, it appeared
that in some cases the United States was supporting such a policy.
Shortly after the Korean Ministry of National Defense signed the
M-16 contract with Colt Industries in 1971, Maremont Corp., the
U.S. manufacturer of the M-60 machinegun, sought to interest the
Korean Government in a production arrangement. Officials held
discussions with Gen. Shin Won Shik, a cosigner on the M-16
contract and Assistant Minister for Logistics and Installations.
General Shin reportedly had stated that South Korea wished to
produce its own weaponry in order to become the munitions suppli-
er for the rest of Asia. One Maremont official told the subcommit-
tee that the Koreans were being encouraged in this effort by both
the Departments of Defense and State. The argument at Defense
was that exports of Korean arms were a good vehicle for ''getting
the Koreans off the dole.^^^ However, on other occasions the United
States refused to approve certain exports.

Korea itself was very interested in the role of arms exporter and
had been actively pursuing it for some time. It had been selling
military software such as parachutes, duffelbags, uniforms, gas
masks, and tents to a number of countries, including Burma, Ethio-

'°« House Committee on International Relations and Senate Committee on Foreign Relations,
joint committee print, "Legislation on Foreign Relations Through 1977," Feb., 1978, pp. 273-300.

'°» The International Traffic in Arms Regulations refers to title 22, Code of Federal Regula-
tions, pts. 121-128, and is published as a brochure by the Department of State.

''"Op. cit., "Legislation on Foreign Relations ' ' *" p. 274, as expressed in such passages in the
act as the following: "It is the sense of the Congress that all such sales be approved only when
they are consistent with the foreign policy interests of the United States * * *."

'" Subcommittee staff interview, June 6, 1978.

pia, Bangladesh, South Yemen, South Africa, the United Kingdom,
Jordan, and Saudi Arabia. "^

More recently, it had become interested in exporting military
hardware licensed by or manufactured in the United States. Since
1974, the State Department has granted approval for Korean muni-

M tions exports under license to Malaysia, Cameroon, and Kuwait.

M The defense-related materiel involved in these exports were 81 -mm

fo mortars and field switchboards. Several other requests for U.S.
license approval have been turned down or are currently pending.
Proposed Korean exports to four countries currently pending in-
volve 106-mm recoilless rifles, M18A1 Mines, smoke grenades, 105-
mm howitzers, and 81-mm mortars. ^^^

Exports of M-16's had been very much a part of the negotiations
with Colt at the earliest stages. Throughout the dealings with Colt,
officials of the Korean Government, as well as unofficial spokes-
men, had pushed for approval to export M-16's. For example, in

le 1976 a Colonel Oh (presumably Col. Oh Jung Sool, an assistant
military attache at the Korean Embassy) visited the Colt facilities
in Hartford to ask Colt to release the Korean Government from the
contractual restrictions against exports."'* As noted, in September
1977, Moon Sung Kyun of Tong II Industries Co.,"=^ wrote Colt
requesting ''approval of production and export of barrel for M-16
rifle." ^^^ In his letter. Moon stated that Tong II was "attempting to
product [sic] barrel of M-16 rifle and to export to countries of
Southeast Asia of friendly nations." Tong II was requesting Colt's
approval prior to getting the approval of the Korean Government,
though stating that the Korean Government wished to be released
from the existing restriction in their contract with Colt. Further,
the Korean Government was aware that the request had to be
directed to the State Department from which approval had to

lel come. Korean representatives did not attempt to negotiate any
other matter with regard to the M-16 contract. Colt declined in a
letter dated September 27, 1977."'

Earlier in 1977, the State Department had denied a request by
the Korean Government for approval to export 1,500 M-16's to an
African country. A State Department official in the Bureau of
Politico-Military Affairs, however, told the subcommittee that the
request should not be construed as a serious one; it had come
through Embassy channels from Seoul and was a courtesy ex-
tended by South Korea on behalf of a visiting delegation which had
requested the rifles."® Nonetheless, the request indicated a continu-
ing desire by the Korean Government to export the weapon.

Equally of concern to the subcommittee were allegations of il-
legal exports. For its part, the Korean Government recently stated
that South Korea ''has never engaged in sales of hardware arma-

'" Subcommittee staff interview, July 25, 1978; Norman Thorpe, "South Korean Firms Thrive
as Exporters of MiUtary Products," Asian Wall Street Journal, Jan. 6, 1978, see appendix C-49.

"' Letter from Assistant Secretary Douglas J. Bennet, Jr., to Congressman Donald M. Fraser,
Sept. 14, 1978.
1 "* Subcommittee staff interview with Paul Gubbins, Stewart Plettner, and Hadwen Stone,
May 23, 1978.

"*See "The Moon Organization" in "Part C-V: Educational, Informational, and Cultural
Activities," pp. 367-368.

"•Letter from S. K. Moon, Tong II Industries Co., to Colt Firearms, Sept. 13, 1977, see
appendix C-34.

"" Letter from H. P. Stone to S."K. Moon, Sept. 27, 1977, see appendix C-35.

"• Subcommittee staff interview, Aug. 16, 1978.

35-508 O - 78 - 7

ments abroad," ^^^ despite the fact that the United States had pre-
viously approved the sale of some items. The subcommittee re-
ceived information which indicated that some exports had occurred
which were not carried out in accordance with U.S. law and that
other unsuccessful attempts at export had been made. Moreover,
other evidence suggested that the Korean Government was contem-
plating further exports without prior State Department approval.

The subcommittee received allegations concerning transfers of
M-16's which it could not confirm and which were discounted by
the executive branch. If true, these transfers did not go through
State Department channels.

One of the allegations concerned the export of M-16's by Korea
through a third party to the Libyan Arab Republic. While the
subcommittee was not able to investigate it thoroughly, the infor-
mation strongly suggested suspicious activities. Therefore, the sub-
committee sent the information to appropriate executive branch
agencies. The subcommittee took the allegation seriously because it
was made several times by seemingly responsible and independent
sources. They included an official of a U.S. arms exporter, a Euro-
pean arms merchant with acknowledged ties to U.S. and foreign
intelligence agencies and to Libya's military procurement offi-
cers, ^^^^ and an international businessman who had access to Libyan
Government documents ^^^ and who alleged that his information
stemmed from direct conversations with Col. Muammar Qaddafi,
President of the Libyan Arab Republic. It should be noted, howev-
er, that the executive branch had no information of any such
exports.

A third case related to a proposed export of M-203 grenade
launchers. *=^2 Qn March 16, 1978, the U.S. Embassy in Seoul cabled
Washington that the South Korean Government was requesting
approval of the loan of one M-203 grenade launcher to the Govern-
ment of Malaysia for "test and evaluation purposes. "^^^ On April
29, Washington cabled Seoul that the request was denied. In the
meantime, however. South Korea, through the Daewoo Industrial
Co., a Korean defense contractor, had sent a letter to the Malay-
sian Government indicating that the launcher would arrive by
April 15. Further, the letter said that if the Malaysian Government
so desired. South Korea could provide three to six launchers.

The letter made clear that the ''loan" was actually a shipment
precedent to sale, as it quoted per unit prices for M-203's. Further,
the opening paragraph of the letter read:

"" "South Korea Disputes Asian Journal Article on Military Exports," Asian Wall Street
Journal, Jan. 9, 1978; see appendix C-49.

*** This source alleged that a Libyan military procurement officer, Mufta Daghil, had told him
that a Korean had offered to supply 20,000 Korean M-16's to Libya.

'" These documents implicated a U.S. businessman in illegal transfers of M-16's to Libya. The
documents did not indicate where the M-16's were originating; however, the businessman was
known to have had business dealings with the Republic of Korea. In the course of investigating
these allegations, the subcommittee uncovered an illegal transfer of M-16's to the Palestinian
Liberation Organization. The subcommittee was provided with the serial numbers of M-16's seized
by the Israeli Government from PLO base camps in southern Lebanon in June 1978. In tracing
these guns, the subcommittee found that they had been previously transferred to the Lebanese
Government, with one exception; one of the M-16's was part of a shipment by the U.S. Army to
Iran.

'"Letter from Suh Chai Pill, Daewoo Industrial Co. Ltd., to Ketua Setiausaha, Mar. 28, 1978;
see appendix C-48.

'"Ibid.

We are pleased to inform you that M-203 grenade launchers are manufactured in
the Republic of Korea and can be exported to friendly countries including Malaysia.
These items are applicable to usage with M-16 rifles."*

Perhaps the most systematic plan by the Korean Government in
pursuit of arms exports involved Tongsun Park. In 1976, Park, in
addition to seeking contracts for handling procurement for the
Republic of Korea, was also seeking agents to handle exports of
Korean "surplus" as well. The subcommittee looked closely at this
matter because it involved some unusual and questionable activi-
ties. Viewed in conjunction with the Colt-Tong II discussions, it
suggested that a new modus operandi was emerging relating to
Korean arms exports.

On May 12, 1977, Tongsun Park held discussions with Interarms'
President Samuel Cummings concerning Interarms' serving as the
agent for Korean arms exports. ^=^^ Following the meeting, one of
Park's associates sent Cummings a draft of a letter to be sent to
the Korean Government, ^^e With some alterations, Cummings sent
the letter to Kim Jin Suk, one of Tongsun Park's employees, for
delivery to the Korean Ministry of National Defense. ^^^ It indicated
Interarms' interest in disposing of Korean surplus defense material
on the international market.

On May 28, 1977, General Yoo Sam Suk of the Ministry replied
to Cummings that his Government could not consider disposing of
its surplus until it had met the needs of its modernization program.
However, rather than mailing its reply directly to Cummings, the
Ministry turned it over to Tongsun Park.^^®

In June 1977 Kim Jin Suk traveled to Seoul, paid a visit to a
high-ranking general in the Ministry of National Defense, and
acquired a ''confidential list" of Korean surplus material. ^^^
The list read as follows:

M79 launcher

3.5' rocket

60mm mortar

81mm mortar

4.2' mortar*

105mm howitzer*

155mm howitzer*

106mm recoilless rifle*

5' rocket launcher

20mm gun, HEI-T-SD

M16 Rifle*

Ml-cal. .30

M2-cal. .30

40mm shell for M79 launcher

M203 (improved M79)

60mm shell

81mm shell

20mm shell

'^U.S. approval required.

7.62mm shell (4-Ball-I— Tracer)

5.56mm shell (Ball M193)

5.56mm shell (tracer M193)

4.2mm shell

106mm shell

105mm shell (HE)

M18A1 mine — Cla)niiore

M19 antitank mine

M67 grenade

Gunpowder

TAI field tele-kit

SB22 operator kit

KPRC6 radio

ANFR 77 radio

FT boat (70— 250-ton— 40-knot)

Gas mask

Helmet

Parachute

>"Op. cit., letter from Suh Chai Pill.

*" Interoffice memorandum from Interarms Monaco to Interarms Virginia, May 15, 1977, see
appendix C-30.

''•Cable from R. J. Ckjnkling to S. Cummings, May 16, 1977, see appendix C-31.

'"Letter from Samuel Cummings to Gen. Seo Jong Chul, May i7, 1977; see appendix C-32;
routing instructions are in the previously cited cable, ibid.

'" Letter from Maj. Gen. Yoo Sam Suk to Interarms, May 28, 1977; see appendix C-28; see
also letter from Interarms Monaco to Interarms Virginia, Nov. 17, 1977; see appendix C-40.

"•Subcommittee staff interview with Kim Jin Suk, June 1, 1978; "Confidential List," see
appendix C-40, letter from Interarms Monaco to Interarms Virginia, ibid.

Park confirmed to the subcommittee that Kim Jin Suk had
acquired the list from the Korean Ministry of National Defense. ^^°
Kim Jin Suk, in an interview, not only corroborated that he had
acquired the list from "a high-ranking general" within the Minis-
try, but that it was drawn up expressly at Kim's request.^"

Five months later Robert Conkling, another Park associate, pro-
vided Interarms with copies of both the reply from General Yoo
and the confidential list. ^" He informed Interarms that Park and
his associates "were interested in discussing with [Interarms] the
possibility of Interarms being their exclusive export sales office for
material [on the confidential list] on an official basis operating out
of Manchester and coordinating through a Korean Government
office in Seoul." Conkling said he would coordinate this with Park
in Seoul, where he was to be the following week, "and Tongsun
would also [coordinate] with President Park," that "President Park
might want [Cummings] to come out this winter and make a
formal deal with them if he [President Park] chose to go ahead on
this modus operandi."

On January 16, 1978, Conkling wrote Cummings detailing the
"extensive research" that Park and his associates had done on the
feasibility of a joint venture to market arms within and outside of
Korea. ^^^ "Dealing directly with the appropriate authorities and
the several companies that make up the defense industry of the
Republic of Korea," Conkling wrote, "the basic mechanics for oper-
ating at this end have been set up."

The scope of activities for the proposed joint venture included
both export of Korean defense industry products ("sale of ROK
manufacturing items and of some surplus. At this time we feel
initially the largest supply item will be ammunition") and attrac-
tion of foreign defense production technology to Korea, with the
goal of "re-export to established overseas markets." Conkling closed
the letter noting that Park and his associates "have moved with
the utmost care in dealing with the Government of the Republic of
Korea and the private sector in this most important and delicate
industry."

The proposed joint venture was to export the 37 items contained
on the list. A great many of those items required prior approval by
the United States for export, although that was noted in the case
of only five. Among those for which no such stipulation was indi-
cated were the AN-PR77 radio, the "PT Boat," and the M-203's, all
of which were produced in Korea with U.S. technological assist-
ance. Aside from the issue of State Department approval, if Korea
were to export these items, it would be doing so in competition
with the U.S. firms producing them in the United States, which
had only provided Korea with production technology on the under-
standing that Korea would make no exports. ^^* The Korean Gov-
ernment obviously was aware of the approval requirement — it was
stated in every manufacturing license agreement issued by the

"° Subcommittee staff interview with Tongsun Park, June 5, 1978.

"' Subcommittee staff interview with Kim Jin Suk, June 1, 1978.

'" Letter from Interarms Monaco to Interarms Virginia, Nov. 17, 1977, appendix C-40.

•" Letter from Robert J. Conkling to Samuel Cummings, Jan. 16, 1978, see appendix C-46

"* A number of U.S. manufacturers who have supplied production technology to Korea have
expressed concern about what they view as competition from the Koreans in international
markets.

' State Department and had been a key tenet in U.S. arms control
policies for a decade.
In April 1978, in response to a stepup in Korean requests for

I approval to transfer munitions items produced in Korea with U.S.

t assistance, the State Department resorted once again to conveying
to the Korean Government the details of the State Department's
policy against these kinds of transfers to third countries. Even
after that, the State Department received yet another request, this
one for permission to transfer 105mm howitzers to the Philippines.
A State Department official commented: "^

* • * The people here nearly went through the roof. If the threat from the North
is as great as the Koreans have been telling us all these years, then why are they
trying to export what they've told us they need for their own defense?

Conclusions and recommendations

Episodes such as the Interarms-Tongsun Park and Tong II negoti-
ations over the export of arms from Korea, the missile systems
issue, and Korean pursuit of a nuclear weapons capability led the
subcommittee to conclude that there were two faces to Korean
Government defense policy; a public and official stance in support
of U.S. policy, and a private, covert strategy of pursuing its own
goals, frequently in circumvention of and with scant consideration
for U.S. policy. ^3«

The Republic of Korea is, of course, a sovereign power. In theory
there is no question as to the legitimacy of a sovereign state
attempting to increase independently its sources of supply of goods
or services. From a practical standpoint, however, the actions of
sovereign states do not occur in a vacuum. In the case of the
Republic of Korea, defense spending involved billions of dollars
from the United States, which was and is committed to building
and maintaining the defense of that country. In the long run, these
expenditures were aimed at Korean self-sufficiency in providing for
its own defense needs. In many cases, Korea itself had requested
the assistance.

For its part, the United States followed an ambiguous policy with
respect to Korean self-sufficiency that both left the door open to
Korea to pursue its own goals, and probably created uncertainty as
to the exact intentions of the United States. And, as noted in
earlier sections, the U.S. frequently failed to respond to Korean
attitudes about events involving their security.

The subcommittee concluded:

(1) That there appeared to be a continuing discrepancy between
United States and Korean perceptions of the military needs of the
Republic of Korea;

(2) That in the area of arms exports, there appeared to be a
contradiction between the stated policy of the Republic of Korea
and the activities it had undertaken;

'" Subcommittee staff interview, Aug. 16, 1978.

'" It seems obvious that foreign, governments, like Korea, do not share the same foreign policy
interests as the United States; U.S. relations with, for example, the Philippines are not the
same as Korean-Philippine relations, especially with regard to such issues as human rights.
These differences in international relations are the crux of some of the difficulties with third-
country transfers of U.S. supplied armaments and munitions items.

(3) That in the area of arms exports, there appeared to be
contradictory forces at work within the executive branch of the
U.S. Government;

(4) That the Korean Government, through its actions, appeared
to question U.S. efforts to regulate international traffic in arms;
and

(5) That U.S. policies favoring Korean self-sufficiency in arms
production may intensify the arms race on the Korean peninsula.

On the basis of these conclusions, the subcommittee recommends
that defense attaches and U.S. military intelligence should closely
monitor the export of arms and other munitions by the Republic of
Korea. The subcommittee expects that if illegal exports occur, the
United States will take steps to deter reoccurrence of such exports
within the guidelines of the Arms Export Control Act. Monitoring
of these exports would be facilitated if the State Department
Bureau of Politico-Military Affairs can improve its liaison with
U.S. defense manufacturers and exporters.

89
11. Intelligence Activities and Plans

INTRODUCTION

The Korean Central Intelligence Agency (KCIA) is very different
from the U.S. Central Intelligence Agency. Unlike the U.S. CIA,
which has no statutory authorization for police, subpena, law en-
forcement, or internal security functions, the KCIA is legally em-
powered to carry on police, public relations, and investigatory ac-
tivities, in addition to foreign and domestic intelligence gathering.^
The subcommittee received a great deal of evidence about the
pervasive influence of the KCIA in Korean society. Gregory Hen-
derson, an American scholar of Korea characterized it as a ''state
within a state." ^ Former KCIA Director Kim Hyung Wook said
that it combines the functions of the U.S. CIA and FBI.^ Former
Korean diplomat Lee Jai Hyon testified: **The KCIA is involved in
virtually every aspect of Korean life." '* What concerned the sub-
committee and in large part led to this investigation was that
many Korean-born persons living in the United States also felt the
omnipresent effects of the KCIA in their adopted country.

Because of allegations that the U.S. CIA had helped establish the
KCIA, the subcommittee staff reviewed documents and interviewed
U.S. Government officials stationed in Korea in the early 1960's as
well as private citizens in an attempt to ascertain the facts about
the KCIA's origin. As best as can be determined from available
evidence and memories, they are as follows.

In 1960, when the Government of Prime Minister Chang Myon
was in power, Lee Hu Rak began to set up a ''combined intelligence
research center" for the collection and analysis of foreign intelli-
gence. When Park Chung Hee's coup occurred in May 1961, Lee
was removed and Kim Jong Pil, the main planner of the coup, took
over the nascent center, renaming it the Korean Central Intelli-
gence Agency.^

In response to the allegation that it had participated in starting
the KCIA, the U.S. CIA informed the subcommittee that it did not
initiate plans for, help to establish, or have any involvement in
I founding the KCIA. ^ U.S. officials did tell the subcommittee staff
I that they had strongly recommended that the KCIA not encompass
j both internal security and foreign intelligence collection functions.
I From the beginning Kim Jong Pil viewed the KCIA as an instru-
ment to preserve his personal political power; succeeding KCIA
directors followed suit in varying degrees. The KCIA has always
been one of the major power blocs in Korea, and its directors have
j been feared by many Koreans. It is generally acknowledged that

' Central Intelligence Agency Act, law No. 1501 promulgated Dec. 14, 1963; amended by law
No. -2590, March 1973; Laws of the Republic of Korea, Third Edition, January 1975, The Korean
Legal Center, Seoul, Korea, p. 83.

* "Activities of the Korean Central Intelligence Agency in the United States," hearings before
the Subcommittee on International Organizations of the Committee on International Relations.
94th Cong., 2d sess., part I, Mar. 17 and 25, 1976 (hereinafter referred to as "SIO-I"), p. 4.

' "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 1st sess., part 1,
June 22, 1977 (hereinafter referred to as "KI-1"), p. 17.

* "Activities of the Korean Central Intelligence Agency in the United States," hearings before
the Subcommittee on International Organizations of the Committee on International Relations,
94th Cong., 2d sess., part II, June 22, Sept. 27 and 30, 1976 (hereinafter referred to as "SIO-II"),
p. 8.

*See also "Part B: Review of Korean-American Relations," pp. 22-23.

* Further details of the CIA's response were not declassified.

because of its vast resources and almost unlimited authority, thei
KCIA has interfered in the lives of Koreans — even naturalized U.S ;
citizens — and in policymaking, press, and academic circles in the
United States.

RESPONSIBILITIES OF KCIA OFFICERS STATIONED IN THE UNITED

STATES

In testimony before the subcommittee, Kim Sang Keun, a formei
KCIA officer with 15 years of experience — 6 of them in the Korean
Embassy in Washington — described the routine responsibilities oi
KCIA officers assigned to the Embassy.' From 1970 to the begin-
ning of 1975, there were on the average 6 or 7 KCIA officers undei
diplomatic cover in Washington reporting to a station chief with
the diplomatic rank of minister. Each officer was assigned to one
or two of the following areas of responsibility: Executive Branch;
Defense Department; Congress; academic community; media;
Korean residents (that is, Korean citizens, naturalized U.S. citizens
and permanent residents of the United States); KCIA administra-
tion; KCIA procurement; and KCIA communications.

Kim and other former KCIA officers made clear to the subcom-
mittee that KCIA officers were not supposed to discuss their work
with each other except when necessary. Normally, only the station
chief was informed as to what each officer was doing. However,
Kim was able to describe each area in general terms.

The officer responsible for the executive branch was to monitor
and evaluate all policy matters of interest to Korea being consid-
ered or undertaken by the executive branch of the U.S. Govern-
ment. Throughout the period 1970-76, the Congress and the De-
partment of Defense were assigned to the same officer. He was to
maintain contact with "pro-Korean" Members of Congress and in-
crease the number of Members favoring Korean Government posi-
tions. In his contacts with the Defense Department he was to
maintain liaison and monitor policy decisions of interest to Korea.
The officer assigned to academia was "to induce American scholars
and Korean scholars in this country to write and to publish articles
favorable to Korea" in order to give Americans a favorable impres-
sion of the country. The officer responsible for the media was to
"induce or request" American reporters to write articles favorable
to the Republic of Korea; he also reported to Seoul on articles
about Korea in the U.S. press, particularly influential newspapers.®
The officer responsible for administration of the local station han-
dled recordkeeping, support to KCIA officers, the KCIA portion of
the diplomatic pouch, et cetera. He also was in charge of procure-
ment; KCIA headquarters sent him instructions on what to pur-
chase and he would ship the goods to Seoul via pouch.®

As a matter of course, all KCIA officers stationed at the Embassy
were required to report to the American desk at KCIA headquar-

' "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess., June
1, 6, and 7, 1978 (hereinafter referred to as "KI-5"), pp. 55-60.

• KI-5, p. 56.

"The subcommittee received information on procurement which was difficult to evaluate. It
obtained a list, classified secret, of equipment to be procured which included electronic surveil-
lance equipment and poison. Depending on the purposes for which the items were to be used,
this procurement raised serious questions.

'oeters in Seoul. The officer in charge of communications in Washing-
-S. ton coded their reports for transmission; he also decoded and dis-
^e tributed incoming cables.

Having been responsible for Korean residents, Kim Sang Keun

was able to give a more detailed account of that position. One of

his responsibilities was to detect and prevent contact between

North Korea and local Korean residents. The KCIA views detection

:er and prevention of North Korean infiltration into the Korean com-

:aii munity as one of its primary responsibilities in the United States.

; ofOne reason is that it could lead to infiltration of South Korean

rji- society because many Korean residents in the United States have

cer relatives in Korea. ^°

r.th Kim testified that he had detected no contacts between the
:ie North Koreans and local Korean residents, although the Embassy
h; believed that one person in the Washington area had some connec-
:.a;tions with the DPRK. However, the officer assigned to academia
^nstold him that the North Koreans had invited several scholars of
■3- Korean background to visit the DPRK. Similarly, Sohn Ho Young,
a former KCIA officer stationed in New York City where the North
> Korean Observer Mission to the United Nations is located, testi-
•kfied:

We have not detected any infiltration on the part of the North Korean mission
'f' into the academic community in this country. However, we have detected certain
approaches to the ordinary Korean community in this country. *•

'fl A former ROK consular official stationed in New York told

subcommittee staff that consular officials were required to cooper-

:^'ate with KCIA officers in detecting North Korean approaches to

;" Korean residents. The KCIA was interested in persons termed

"pro-North" partly because of possible subversion but also because

^'they were anti-ROK Government. In his opinion, few Koreans in

'.^the United States actually were pro-North, and allegations were

.often invented to discredit people with anti-ROK Government

^ views. It should be noted that it was widely believed even among

^anti-Park Koreans that some anti-ROK Government activities in

;^ the United States do have ties with North Korea. Since none of the

^ persons holding this belief were able to furnish substantiation, the

.] subcommittee was unable to determine whether it was true or

'■^ whether it resulted from the invention of allegations described by

;.,the former consular official. That official further said that the New

J. York Consulate was not really worried about North Korean activi-

jfties because the FBI was closely observing that mission and shar-

!^|ing the information with the Consulate.

%} Because of allegations of improper activities by DPRK officials in
'' other countries — especially drug trafficking and the sale of duty-
^^free liquor to raise much needed foreign exchange for financially
'^.beleaguered Pyongyang — and because North Korean attempts to
contact Korean residents in the United States were a major con-
, cern of the KCIA, the subcommittee requested an FBI briefing on
J i North Korean activities in the United States. The FBI informed

'"• "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Ck)ng., 1st sess., part 3,
Nov. 29 and 30, 1977 (hereinafter referred to as "KI-3"), p. 10.

" KI-3, p. 26.

the subcommittee that the content of that briefing could not be
declassified, but it did provide the following unclassified statement:

The' FBI informed the subcommittee in a private briefing that experience through
investigation and asset information has shown that countries while awaiting perma-
nent status at the United Nations are hesitant to engage in prohibited acts which
might jeopardize their chance of obtaining permanent status.

It should be noted that North Korean activities in the United
States did not fall within the mandate of this investigation; there-
fore, the subcommittee made no independent investigation of those
activities. ^2

Among Kim Sang Keun's other responsibilities as officer in
charge of Korean residents were distribution of propaganda materi-
al about the Yushin constitution and monitoring of anti-ROK Gov-
ernment activities. In gathering information on demonstrations, he
cooperated with consular officials and used Korean residents. He
also read the local Korean press reports for such information.
Particulars about demonstrations, including the names and some-
times photographs of demonstrators, were transmitted to headquar-
ters. Kim kept a file on anti-Government activists to facilitate
reporting and to answer specific questions from Seoul.

At the beginning of 1975, the number of KCIA officers in the
Embassy suddenly doubled. Testifying as to the reason, Kim said,
*'I heard, and it is my view now, that during this period * * * KCIA
was planning to intensify its activities in the United States * * *" "
Although he did not know the reason for the greater activity, his
personal opinion was that it related to the decrease in U.S. mili-
tary aid which was planned at the time, as well as the continuing
problems with the academic community, the media, and Korean
residents. ^'^ Because of the increase, for the first time an officer was
assigned the main responsibility of liaison with the U.S. intelli-
gence community. Another new position dealt with gathering books
and other published materials on scientific topics to be sent to
Seoul.

According to several former Korean diplomats, tension between
KCIA officers and career foreign service officers is a common fea-
ture of Korean diplomatic life. This stems both from the KCIA
officers' assumption of functions which the diplomats consider their
own and from KCIA attempts to direct diplomats in activities
which the diplomats view as improper. Some former diplomats
indicated that this tension played a role in their decisions to resign
from Government service. Such was the case with former informa-
tion officer Lee Jai Hyon. Yang Yung Man, a former consul at the
Korean Consulate in Toronto, publicly stated that he sought refu-
gee status in Canada because KCIA officer Park Shin Chun pres-
sured him heavily to take action against anti-ROK Government
activists. Park had been transferred to Canada from the KCIA
station in Washington; as of October 1978 he was chief of the
American section at KCIA headquarters in Seoul."

" Likewise, the investigation did not pursue the question raised in the KCIA's 1976 plan (see
pp. 106-110) relating to Americans working on behalf of North Korea, or pro-North Korean
residents in the United States, or the matter of Members of Congress named in the plan as
having been contacted by the North Korean Government. This last problem was referred to the
House Committee on Standards of Official Conduct.

" KI-5, p. 55.

'♦ KI-5, pp. 72-73.

" Confidential subcommittee staff interview.

In sum, much of the daily work of KCIA officials is routine and
of unquestionable propriety: Liaison with the U.S. intelligence com-
munity; gathering of published materials on policies and actions of
the U.S. Government; and monitoring attitudes of the media, aca-
demics, the Korean resident community, and the general public.
Kim Sang Keun and Sohn Ho Young — another former KCIA offi-
cer— described spending a great deal of time just learning their
way around and getting acquainted with members of the Korean
community.

It is possible to conduct the activities described above within the
bounds of legality and propriety. However, some of them can easily
be conducted improperly or illegally, such as inducing scholars and
newsmen to favor the Korean Government and monitoring anti-
Government demonstrations.

HARASSMENT AND INTIMIDATION

Harassment and intimidation of persons in the United States
were clearly outside the scope of proper activities. By 1972, the
U.S. intelligence community was aware that the KCIA was not
only monitoring the activities of Korean residents in the United
States, but also "attempting by unlawful means to influence and
sometimes intimidate hundreds of Korean nationals who were
living in this country." ^«

Within the Korean-American community it was widely believed
that KCIA intimidation and harassment were commonplace. This
belief was frequently cited as a factor in the reluctance of persons
of Korean origin, whether U.S. citizens or not, to speak with sub-
committee staff. Almost every such person contacted expressed
concern lest even the fact that he or she had talked with subcom-
mittee staff become known to the Korean Government. This was
true whether or not the person supported or opposed the ROK
r Government. They expressed fear for themselves, for relatives
living in Korea, and for their businesses, especially when engaged
[ in business with Korea.

r Despite the belief in and assertions of widespread harassment
s'and intimidation, it proved difficult to obtain hard evidence. Inci-
; dents regarded as threats by the KCIA were often ambiguous; for

I example, silent or anonymous telephone calls late at night. The

• origins of damaging rumors were hard to verify. In some clear
i cases of harassment, it was difficult to prove KCIA involvement.

• Nonetheless, the subcommittee found sufficient evidence to con-
- elude that the KCIA had engaged in a systematic process of intimi-

I I dation and harassment of Korean residents in the United States.
i| Kim Woon Ha, the publisher of a Korean-language newspapaer
?'in Los Angeles, testifying before the subcommittee in March 1976,

said:

Because of abusive KCIA activities • * * Los Angeles is not U.S. territory to
I Korean-Americans; it has become rather a territory of South Korea. To these
^ Koreans, the mayor of Los Angeles is not Tom Bradley but the Korean Consul
!i General. "

'• "Activities of 'Friendly' Foreign Intelligence Services in the United States: A Case Study,'
Report of the Senate Select Committee on Intelligence, U.S. Senate, June, 1978, p. 1.
" SIO-I, p. 17.

After many years as a journalist in Korea, Kim worked in the
United States from 1972 until 1974 as a correspondent for two
major Korean papers. He testified that he was

• • * surprised because Korean-American journalism in the United States suffered
conditions similar to those in Korea. This was true in the United States which
guarantees freedom of the press. * * * There were two KCIA agents [who] directly
controlled the news media. * * * When reporters did not obey their instructions,
they intimidated them; and additional intimidation came from newspaper headquar-
ters in Seoul at the direction of KCIA-Seoul.

Their methods of intimidation included threats of losing jobs, refusing extension
of passports and other redtape, pressuring newspaper companies to recall the Los
Angeles-based journalists and sometimes physical threats were used. I was also
intimidated and experienced direct intervention from the KCIA for about 1 year."

After resigning and taking over a local Korean paper, The New
Korea, Kim began what he described as an active campaign for the
human rights and welfare of Korean-Americans and to advocate
democracy and human rights in Korea. Kim testified that the
Korean Consul General, Park Young, tried to blunt his criticism by
offering him a free trip to Seoul with promises of good treatment
there. The Consul General and the KCIA station chief asked Kim
not to criticize the ROK Government and told him he would experi-
ence retaliation if he persisted. When Kim continued his criticism,
the Consul General successfully pressured a number of advertisers
to withdraw their support.

A National Assembly member visiting from Seoul told Kim that
he could offer, on behalf of KCIA Director Shin Jik Soo and Minis-
ter of Culture and Information Lee Won Kyong, considerable finan-
cial support for The New Korea if Kim would stop criticizing the
Korean Government. If Kim did not accept, he would face retali-
ation. Shortly thereafter, a man whom Kim regarded as an "under-
ground KCIA agent" gave him "final notice" to choose one of three
alternatives: (1) stop criticizing and accept the financial support; (2)
sell or close the paper; or (3) face retaliation. After refusing the
offers and ignoring the threats, Kim was labelled a Communist by
the KCIA. Friends and supporters drew back from him, employees
resigned, new employees could not be found. Kim and his wife
managed to keep the paper going alone.

Song Sun Keun, who published a Korean-language newspaper in
San Francisco, testified to similar experiences.^^ Song began to
publish his paper, which was critical of the Korean Government
and of KCIA activities in the United States, shortly after the
Yushin system was established in Korea at the end of 1972.20 A
local Korean businessman offered support if Song would turn his
paper into "a pleasant community bulletin board." He received a
handsome offer to buy the paper, but refused and continued to be
critical of the Korean Government."

One event which Song publicized was the disruption of Kim Dae
Jung's speech in San Francisco in May 1973. It was the most
serious KCIA effort to monitor and interfere with Kim Dae Jung's
activities in the United States. At one point the Consul General in
San Francisco, an old friend of Song's family, had ordered Song not

'• SIO-I, pp. 17-18.

'• KI-5, p. 79.

*» See "Part B: Review of Korean-American Relations," p. 38.

*' KI-5, p. 81.

to arrange another meeting for Kim. Song challenged the Consul
General's authority to give orders to a U.S. citizen and refused.^^

When Song persisted in his criticism, Limb Man Sung, the KCIA
officer at the Consulate General, pressured advertisers to withdraw
their business. During the 1976 campaign for the election of offi-
cers of Bay Area Korean residents. Song actively opposed the slate
of candidates supported by the Korean Consulate. On the night
before the election he stationed himself outside the Consulate with
a camera. According to Song's testimony, Limb became so enraged
at finding him there that he attempted to run his car into Song's.
At a later time. Limb told Chung Tai Bong, a mutual acquaintance
of Limb and Song, that he was arranging to have Song killed. ^^
Eventually the withdrawal of advertising forced Song to stop pub-
lishing.

Retired Admiral Lee Yong Woon, who was active in anti-Govern-
ment circles, told subcommittee staff that he had been harassed by
the Korean Government, including the KCIA, in four countries:
Korea, Vietnam, Japan, and the United States. It had been alleged
by some Koreans that he had ties with North Korea. Kim Woon
Ha testified that the Consul General and the KCIA station chief in
Los Angeles once asked him to publish a prepared article attacking
Lee. Lee said he once declined an offer of $100,000 from a person
he believed to be a KCIA agent to stop his anti-Government activi-
ties. A Korean whom he hired to work in the motel he operated
turned out to be a KCIA agent, according to Lee, who sabotaged
expensive equipment. On one occasion when Lee was away, a group
of three or four Koreans came to the motel late at night in consul-
ate cars. Their questioning about Lee's whereabouts so upset the
manager that he reported the incident to the FBI. On another
occasion two masked men entered the motel with guns and said
they were there to kill Lee, but were frightened away by the
arrival of a customer. Lee said he received numerous threatening
phone calls. He also told subcommittee staff that his son who lives
in Seoul was interrogated and tortured by the KCIA on a number
of occasions in connection with Lee's activities.

Cho Byung Ung, a Chicago shoemaker, was warned by persons
whom he considered to be KCIA operatives that if he did not stop
his anti-Government activities his family in Korea might be
harmed and his wife not allowed to come to the United States.
Cho's wife told him by telephone and letter that she was frequently
interrogated by the KCIA. She even threatened to divorce him
because she could not stand the pressure.

The subcommittee received numerous other allegations of KCIA
harassment from anti-Park Korean-Americans. Many were accused
of being Communists. Friends visiting from Korea were told by the
KCIA to avoid them. Businesses were boycotted, apartments and
offices ransacked. Anti-Government activists had trouble getting
their Korean passports renewed. Threats were voiced concerning
the welfare of relatives in Korea, as mentioned earlier. Relatives in
Korea wrote letters urging their U.S. families to stop anti-Park
activities. Those who received the warnings believed them to be the
work of the KCIA; they pointed out that their relatives in Korea

" KI-5, p. 83.

" See Chung Tai Bong's sworn statement, KI-5, appendix 5F, p. 214.

could only have learned of their activities in the United States if
the KCIA had informed them. There were also allegations that the
KCIA attempted to control the Korean-American community
through churches and that it went so far as to ordain quickly and
send clergymen to this country for that purpose."

Not all of the subcommittee's information on harassment and
intimidation came from the victims. Kim Sang Keun testified at
length about the measures against Kim Dae Jung in 1973. He also
said that the KCIA closely monitored anti-Park demonstrations
and photographed the participants. Former Education Attach^
Kang Kyung Koo told the subcommittee that he tried to persuade
students not to demonstrate, saying they would get in trouble with
the FBI and that their chances for future employment in Korea

might be harmed."

INFLUENCE ACTIVITIES

As noted in the introduction to this section, KCIA participation
in influence activities in the United States was not a departure
from its authorized scope of duties. In some ways the KCIA acted
in the United States as if it were in Korea.

The KCIA had responsibility for much of the Korean Govern-
ment's influence activity in the United States, many operations
being carried out according to its formalized plans and instructions.
Some of its work was directed from the Blue House as part of
President Park's efforts to control influence activities in the United
States. Other ROK Government factions were also carrying on
lobbying and influence activities independent of, suid in some cases
vying with, the KCIA.^« Finally, within the KCIA itself, factions,
personal allegiances, and changes in leadership and policy signifi-
cantly affected its activities in the United States. Adding to the
complexity of the situation was the fact that the KCIA often car-
ried out its missions through other Korean Government agencies
and non-Governmental organizations and individuals.

The KCIA s plans for clandestine operations

The first detailed public description of KCIA influence operations
in the United States was provided in June 1975 when Lee Jai Hyon
testified before this subcommittee. Lee, who had been chief cultural
and information attache at the Korean Embassy in Washington
from 1970 to 1973, described meetings he had attended at the
Embassy in the spring of 1973 at which the KCIA station chief had
described a KCIA plan for clandestine operations in the United
States. Lee described the plan as "highly sophisticated"; its purpose
was to "mute criticism" of President Park's government and in-
cluded buying off potential supporters in the United States.

The KCIA plan outlined by Lee covered nine points:

(1) To seduce and, if possible, buy off American leaders— particularly in Con-
fess—who have had any kind of close personal contacts with Korea through the
Korean war or business. * * *

(2) To apply covert pressure on the important American businessmen who have
vested interest in Korea to exercise their influence in the Congress and the adminis-
tration to support Park's repressive policies.

■* Subcommittee stafT interviews
-KI-5. pp. 57-58; 112

••See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp.
124-125; 129; 149 *^*^

(3) To organize more American and Korean business groups, like the American-
Korean Chamber of Commerce in New York and elsewhere, that would voice
support for Park through their officers pwDSsibly handpicked and prodded by the
KCIA.

(4) To organize professional associations and societies of Korean scholars in the
areas of Korea, East Asia, and Communist affairs studies to extract their support
for Park, with reward of Embassy entertainments and possibly free VIP trips to
Korea.

(5) To organize indirectly, or to finance covertly scholastic meetings, seminars and
symposia of Korean and American professors to rationalize Park's dictatorship or,
at least, to curb their criticism. * * *

(6) To publish through KCIA's front-men pro-Park Korean community newspapers
in Washington and some other major cities in the United States to disseminate
Park's propaganda among the Korean residents. * * *

(7) To operate and finance through KCIA's front-men and collaborators Park's
propaganda Korean language broadcasting in Washington and other areas of large
Korean communities. * * *

(8) To regiment Korean communities in the United States by infiltrating with
front-men or undercover agents the established Korean residents associations and
by creating new ones where such associations have not yet been organized. * ♦ *

(9) To intimidate "uncooperative" Korean residents in the United States through
their families, relatives and close friends in Korea, to silence dissidents and to make
already silent ones more "cooperative." * * * *'

Lee's testimony was corroborated by additional evidence gath-
ered by this and other congressional and executive branch investi-
gations. The allegation that part of the plan was to "seduce" and
"buy off American leaders, particularly in Congress (point 1),
resulted in extensive investigations by the Justice Department and
the two ethics committees of Congress. Instances were uncovered of
actual and attempted cash payments to U.S. legislators, as well as
less direct forms of "seduction."

Other allegations made by Lee Jai Hyon were similarly substan-
tiated. For example, the subcommittee found that the ROK Gov-
ernment with the active participation of the KCIA had indeed
covertly financed academic activities (point 4);^^ that it had covert-
ly financed Korean residents' newspapers and broadcasting media
(points 6 and 7);" that it had attempted to infiltrate Korean resi-
dents associations (point 8); and that the KCIA took steps to intimi-
date "uncooperative" Korean residents in the United States (point
9).

Prior to 1973, executive branch reports indicated that President
Park was personally aware of influence activities in the United
States.3° In the summer and fall of 1973, other reports indicated
that the KCIA was harassing Korean residents and was believed to
be involved in kidnaping Korean opposition leader Kim Dae Jung.
Kim's kidnaping increased the fear with which Korean-Americans
regarded the KCIA.

Kim Sang Keun s testimony

Testimony and information from Kim Sang Keun, a KCIA officer
at F->rean Embassy in Washington from 1970 to 1976, added

" "Human Rights in South Korea and the Philippines: Implications for U.S. Policy," hearmgs
before the Subcommittee on International Oi ganizations of the Committee on International
Relations, 94th Cong., 1st sess., May 20, 22, June 3, 5, 10, 12, 17, and 24, 1975, pp. 180-181.

" See "Approaches to U.S. Scholars and Research Institutes," and "Use of Academic Confer-
ences" in "Part C-V: Educational, Informational, and Cultural Activities," pp. 284-295.

** See "Attempts to Influence Korean Media in the United States" in "Part C-V: Educational,
Informational, and Cultural Activities," pp. 301-305.

'"See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp.
124-125; 129.

further details. Kim's main duties, as noted earlier, had to do witl
local Korean residents. While his information on KCIA operation!
was limited, it still supported the reports of Lee Jai Hyon, th<
executive branch, and other sources which indicated the existence
of KCIA plans.

In 1973 the KCIA and the Korean Ambassador in Washingtoi
formulated a written "Plan to Properly Guide the Korean Resi
dents," according to Kim. It resembled the Korean residents sec
tion of the "1976 Plan for Operations in the United States" whicl
was published by this subcommittee in November 1977. ^^ Althougl
he did not attend, Kim was aware of meetings of higher rankinj
Embassy officials in the spring of 1973 held under the leadership o
KCIA Station Chief Yang Doo Won (also known as Lee Sang Ho^

As described elsewhere in this report, in 1973 U.S. Governmen
officials became concerned about KCIA activities in the Unite(
States and asked for KCIA station chief Yang's recall to Seoul.^
After returning to Seoul Yang was promoted to the position o
Deputy Director for Security of the KCIA and was given supervi
sory responsibility over all KCIA influence activities directed a
the United States. Thus, the change represented by Yang's recal
was largely cosmetic. From that position Yang continued to orches
trate KCIA influence activities in the United States throughou

1974 and 1975. He sometimes circumvented the usual chain o
command through the Washington station chief and gave order
directly to individual KCIA officers in the Embassy. In 1974, fo
example, Yang sent instructions to Kim Sang Keun regarding wha
came to be known as Operation White Snow. Kim was to be th*
field officer in charge of reporting on the activities of Hancho Kirr
an American citizen who told Kim Sang Keun that he had numei
ous contacts with prominent Americans, including Congressmen, j
White House aide, journalists, and academicians. The object o
Operation White Snow was to exploit these contacts in order t
create public attitudes and political influence favorable to th^
Korean Government. The operation was to include buying off an«
seduction of Congressmen and others as described by Lee Jai Hyoi
in his testimony. Kim was to report directly to Yang.^^

Yang bypassed the KCIA station chief on other occasions also. L

1975 he instructed Kim Sang Keun to receive and disburse fund
for an intelligence and influence operation involving Tongsui
Park, which included teaching Park how to write intelligence r€
ports and send them to Seoul. Park was shown how to communi
cate with KCIA headquarters in Seoul via a telex machine in hi
office-^** Again Kim reported directly to Yang. In late 1975 Yani
had Kim Sang Keun deliver a letter and $3,000 to Pak Bo Hi
president of the Korean Cultural and Freedom Foundation an<
special assistant to Sun Myung Moon. Kim received these instruc

'' KI-5, p. 64; KI-3, pp. 135-137.

"See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," p;

" The details of the Hancho Kim operation were extensively covered in hearings of the Hous
Committee on Standards of Official Conduct and in the trial of Hancho Kim on charges '
conspiracy to bribe public officials, which resulted in a guilty verdict on Apr. 8, 1978.

"^^ '^°'*^^" Infiuence Investigation, Part 1," hearings before the Committee on Standan
of Official Conduct, 95th Cong., 1st sess., Oct. 19, 20, and 21, 1977; testimony of Kim Sang Keui
p. 62; testimony of B. Y. Lee, p. 79.

I tions directly from Yang who did not tell him why the money was
5 being sent.^^

t In September 1975, Choi Cheyung, president of the United Young
. Co. in New York City, which has sold equipment to the KCIA,

presented Kim Sang Keun with a letter from Yang Doo Won. It
^ instructed Kim to turn over to Choi the $400,000 which Yang had
. entrusted to Kim in mid-1975. Yang had transmitted the $400,000
. in the form of checks drawn on Tongsun Park's Riggs National
f Bank account, payable to Kim Sang Keun. Choi was to safeguard
J the money and return it to Yang with accrued interest when
, instructed to do so. Choi deposited the money in various bank
j accounts. In addition, he purchased $50,000 worth of stock in the

Diplomat National Bank in September 1976, some of them which
I Unification Church members had had to sell back following public-
t ity about large-scale purchases by Moon and his followers.^^ Choi
t insisted to subcommittee staff that the bank investment was not
L made at the direction of anyone else.

Yang Doo Won also sent Kim Sang Keun approximately $10,000
J in a diary cover with instructions to convey it to a Dr. C. C. Choi (a
r different person from Choi Cheyung) for unspecified reaisons." Kim

also testified that he received substantial sums from Yang to sup-
I port a newspaper in the Washington area run by Hahn Kwang
L Neun.^®

, To some extent Yang's bypassing of normal channels reflected
' personality differences and factionalism within the KCIA. KCIA
. directors and other high ROK Government officials often retained

the loyalty of former subordinates for years after losing their titles

■ and positions, enabling them to exercise continued influence and to
' receive personal favors. Yang had been Kim's immediate superior

in Washington and Kim was expected to retain close and loyal ties
[ to him.3»

' Some of the persons and organizations used by the KCIA to carry
; out assignments in the United States had connections with high
• Government officials in Seoul and therefore did not have to work
^ through the local station chief. This also accounted for the circum-
'- vention of the normal chain of command in the KCIA. Tongsun

Park, for example, made it clear to Kim Sang Keun that he consid-
> ered it beneath his dignity to be instructed by a low-ranking KCIA
' official. Park delegated this function to his subordinate, B. Y. Lee,

■ while Park kept his own high-level contacts with the Korean Gov-
' ernment.'*° Because of his connections in Seoul, Park was able to

" Pak told Kim at the time, and testified to the subcommittee, that the money was used to
reimburse a Japanese Unification Church member for speaking at ROK Government anti-
Communist rallies in Korea. See also the "Moon Organization' in "Part C-V: Educational,
Informational, and Cultural Activities," p. 370.

**See also "Moon Organization" in "Part C-V: Educational, Informational, and Cultural
Activities," p. 383.

" According to Dr. Choi Chai Chang, Chung Kyu Sup, a former Korean diplomat now living in
the United Stc.tes, told Choi in early 1975 that he had asked Yang Doo Won to send a package
of money for him through the diplomatic pouch. Chung asked Choi to accept the package on his
behalf if someone should bring it from the Korean Embassy. Several months later, Kim Sang
Keun delivered a sealed package to Choi without comment. Choi telephoned Chung who came a
few hours later and took the package away without opening it. According to Choi, they never
discussed the contents of the package. Chung confirmed Choi's version of these events.

" Hahn and his newspaper were referred to in the media section of the KCIA's 1976 plan; see
p. 106ff; also see "Attempts To Influence Korean Media in the United States," p. 303.

"Subcommittee staff interviews of Kim Hyung Wook and Kim Sang Keun.

*° Subcommittee staff interviews ot B. Y. Lee and Kim Sang Keun.

100

survive the bitter enmity of Korean Ambassador to Washington,
Kim Dong Jo.

Pak Bo Hi likewise had influential contacts m Seoul, making it
unnecessary for him to work through lower ranking Korean offi-
cials in Washington and also counterbalancing those in the Gov-
ernment who opposed him and the Moon Organization he repre-
sented. Kim Sang Keun first met Pak in 1970 or 1971, when, as a
new KCIA officer in Washington, he accompanied fellow KCIA
officer Col. Lim Kyuil to Pak's office. Colonel Lim was serving as
an assistant military attache at the Embassy, a position which Pak
had held from 1961 to 1964. Lim and Pak had a private conversa-
tion in a room apart from Kim.'** Later Kim saw Pak at a Little
Angels concert and occasionally at the Embassy, but had no fur-
ther contact with him until he delivered the letter and money from
Yang Doo Won in 1975. Kim said Pak did not get along well with
the KCIA station chief in Washington from 1974 to 1976, Kim
Yung Hwan, but that Pak was close to Yang." Kim also said that
at one time the KCIA in Washington had discussed using Pak but
concluded that he could not be managed from Washington because
of his direct connections with the Blue House.

Lee Jai Hyon recalled Pak's participation in a Blue House proj-
ect to publish a book laudatory of Park Chung Hee and his Govern-
ment.'*^ Lee also said that Pak was able to send messages to Seoul
through the communications room at the Korean Embassy.

Pak Bo Hi, during his testimony before the subcommittee, re-
vealed that he had ties with Park Chong Kyu, head of the Presi-
dential Protective Force; Kim Sang In (Steve Kim), a KCIA agent
according to a State Department official; and Kim Un Yong
(Mickey Kim), a subordinate to Park Chong Kyu. It was Pak Bo Hi
and Park Chong Kyu together who arranged for the letters that
were sent on Blue House stationery, signed by President Park, to
American supporters of Radio of Free Asia, a project of Pak's
Korean Cultural and Freedom Foundation.*^ This occurred in the
fall of 1970 shortly after the decision was made that Park Chong
Kyu and Pak Bo Hi were to be part of a coordinated lobbying plan
directed at the United States.*^ Also noted elsewhere in this report
is the fact that Park Chong Kyu commanded a power bloc within
ROK Government circles that rivaled the KCIA. Thus, like Tong-
sun Park, Pak had powerful connections in the Korean Govern-
ment independent of the KCIA.

Kim Sang Keun made it clear to the subcommittee that it was
not his practice to inquire into the underlying relationships betwen
individuals such as Tongsun Park, Hancho Kim, Pak Bo Hi, and
-Korean officials in Seoul. Since Kim spoke little English, he was
not in a good position to determine what relationships they had
with Americans, particularly American officials. There was, there-
fore, a potential for exaggeration and distortion built into the

*' Subcommittee staff interview of Kim Sang Keun.

"See also Kim Hyung Wook testimony, KI-1, p. 29.

«'See "Moon Organization" in "Part C-V: Educational, Informational, and Cultural Activi-
ties, p. 365.

loc*^* also "Part C-III: Executive Branch Awareness of Questionable Korean Activities," p.
kiy o^°°" Organization" in "Part C-V: Educational, Informational, and Cultural Activities," pp.
od4-c>oo.

** "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp. 124-125.

101

KCIA's system of conducting covert influence operations such as
the ones reported by Kim Sang Keun.

KCIA use of 'outsiders"

The KCIA's use of non-KCIA officials, whether private citizens or
government officials — including Tongsun Park, Pak Bo Hi and
Hancho Kim — was consistent with the 1973 plan outlined by Lee
Jai Hyon. Lee said, "I realized that the meetings were in fact an
initiation of converting all the diplomatic and consular officers into
KCIA auxiliaries." "«

Without the help of people from other ROK Government agen-
cies and as well as from individuals outside the Government, the
KCIA could not have conducted the kinds of influence activities it
planned. Only a very few KCIA officials, such as Steve Kim, spoke
fluent English and could move easily among influential Americans.
Contact, therefore, had to be made through agents of influence,
collaborators, and informants with the appropriate educational,
professional, and linguistic backgrounds. These assets included
Tongsun Park, who was friendly with Congressmen and other gov-
ernment officials; Pak Bo Hi, with access to the Moon Organiza-
tion; Kang Young Hoon, the director of a research institute; Suzi
Park Thomson, employed in the office of House Speaker Carl
Albert; and Kim Kwang, an aide to Congressman Cornelius Gal-
lagher. These resources complemented those of the KCIA and could
not have been duplicated by relying solely upon regular KCIA
employees. Often, as with Tongsun Park and Pak Bo Hi, the KCIA
had to share these resources with other power blocs; its control was
further limited by their personal ambitions. The KCIA was also
hampered by the fluctuating availability of operating funds from
Seoul.

The subcommittee's investigation uncovered numerous instances
where other branches of the Korean Government were used to help
the KCIA. According to former KCIA Director Kim Hyung Wook,
in the early stages of Tongsun Park's relationship with the KCIA,
Kim had the Korean Exchange Bank transfer large currency hold-
ings from one U.S. bank to another to assist Park in obtaining a
loan for his George Town Club. Kim also assisted Pak Bo Hi and
Yang You Chan in setting up Radio of Free Asia by telling the
Ministry of Culture and Information to give the project its sup-
port.*^

The rivalry between the KCIA and other power blocs was again
illustrated by the dispute over the rice commissions Tongsun Park
received in 1971. Park Chong Kyu ''snatched" this money from
Park, but eventually agreed to give it back following negotiations
with Kim Hyung Wook and Lee Hu Rak. The KCIA's position was
that Park needed the money for influence activities in the U.S.
Congress, whereas Park Chong Kyu wanted it for the political
coffers of the ruling Democratic Republican Party. (This incident
was denied by Park in discussions with subcommittee staff.)*®

♦• SIO-II, p. 3.

*' Kim also used his authority as KCIA director to expedite the issuance of passports for the
Little Angels; see KI-1, pp. 27-28.

"KI-1, pp. 23-24; subcommittee staff interview of Tongsun Park.

102

WRITTEN KCIA PLANS

When Lee Jai Hyon revealed the KCIA's covert plans to the
subcommittee in 1975, there was no written evidence to corroborate
his testimony. Later a number of documents did come to light
during public testimony. They made it clear that the plans Lee
described were part of continuing systematic KCIA efforts to gain
influence and control over American institutions by covert means.

The subcommittee found no evidence indicating the existence of
formalized written plans for lobbying and influence activities in
the United States prior to 1970, although such activities were
underway at that time. As noted earlier, the KCIA had been moni-
toring Korean residents in the United States, creating an atmo-
sphere wherein many Korean residents were afraid to express
opposition to the Seoul government. However, it is clear that KCIA
activities during the 1960's were not nearly as widespread or ambi-
tious as they became after 1970.

The documents revealed in public testimony which the subcom-
mittee examined were written between 1970 and 1976 and de-
scribed KCIA plans to influence American policy and opinion. Com-
bined with other information and testimony, they revealed much
about KCIA priorities and operating procedures in the United
States in the 1970's.

Documents relating to Tongsun Park 's activities

When Federal agents searched Tongsun Park's residence in
Washington, they found a number of documents, written in
Korean, which appeared to be carefully drawn plans for intelli-
gence and influence operations in the United States. All but one
appeared to have been written in 1970. The remaining one, entitled
"The U.S. Congressional Delegation's Visit to Korea," was appar-
ently written in 1974. An additional document dated September 30,
1972, was found in Park's house by one of his employees.^^

Tongsun Park denied having had any part in composing the
documents, but one contained notations in what appeared to be his
handwriting, and there were many accurate descriptions of his
activities. Park suggested that Steve Kim had composed the docu-
ments. (Kim was a frequent visitor to Park's house while serving as
an aide to KCIA Director Lee Hu Rak and later as KCIA station
chief in Mexico City.) Kim Sang Keun, after inspecting the docu-

♦»The documents were made public by the House Committee on Standards of Official Conduct
durmg Its hearings in October 1977 and April 1978 ("Korean Influence Investigation, Part 1,"
heanngs before the Committee on Standards of Official Conduct, 95th Cong., 1st sess., Oct. 19,
20, and 21, 1977; herein referred to as "House Ethics 1"; and "Korean Influence Investigation,
Part 2," hearings before the Committee on Standards of Official Conduct, 95th Cong., 2d sess.,
Apr. 3, 4, 5, 10 and 11, 1978; hereinafter referred to as "House Ethics 2"). The documents were:

1. "Results of TS Activities"— dated Sept. 30, 1972; discussed in the testimony of Jay Shin
Ryu, House Ethics 1, pp. 195-199; committee exhibit 60, p. 570.

2. "Korea's Foreign Policy Toward the United States"— House Ethics 2, p. 994.

3. "Plans for Korea's Foreign Policy Toward the United States"— House Ethics 2, p. 1004; this
document was apparently written shortly before the November 1970 congressional elections,
since it discusses making campaign contributions and refers to events expected to take place in

4 Report "Relating to Congressman Otto Passman"— House Ethics 2, p. 1040; apparently
drafted in late 1970 or early 1971, since it refers to events expected to take place in early 1971.

5 United States Congressional Delegation's Visit to Korea^'— House Ethics 2, p. 1029; appar-
ently drafted in 1974, since it refers to the oil crisis and the resignation of Vice President
Agnew as past events, and mentions approaching elections.

103

ments in the original Korean, concluded that the author had used
the terms, format and writing style of the KCIA.'^®
The document entitled ' 'Plans for Korea's Foreign Policy Toward

'the United States" contained a detailed section on "Invitation Di-
plomacy": Inviting Senators, Congressmen, media figures, and

! other prominent Americans to Korea where they could be persuad-
ed to support Korea's position on foreign aid bills and other issues.
The plan recounted in detail the results of past invitations to
certain Congressmen and concluded that these efforts had been
^'almost 100 percent successful." In selecting targets for 'Invitation
Diplomacy," the plan said:

The main targets are U.S. senators and congressmen who are in the position to
help Korea. The invitees shall include members of the academia, financial, and
media circles on the basis of their involvement in the issues that may arise between
Korea and the U.S."

The plan named individual Congressmen, Senators, journalists,
and businessmen who were to receive special attention, including
invitations to visit Korea. However, the invitations were not to be
made directly by KCIA personnel:

It is recommended that invitations be sent out by the speaker of the Assembly or
by the Prime Minister, and by a cabinet minister if otherwise inappropriate.'*

Under a section entitled ''Conduct of Diplomacy through Advanc-
ing Interests of Senators and Congressmen," the plan advocated
harnessing ROK economic policies to the goal of influencing U.S.
foreign policy. Business firms within the district of a particular
Congressman or Senator were to receive assistance in investing in
Korea. Examples of how a Congressman or Senator had been won
over by ROK economic assistance to his district were cited. At one
point the plan stated:

We give continuous support to the larger firms which have invested in Korea
already (Gulf, Caltex, American Airlines, Fairchild) so that we can win over the
members of Congress in whose districts the headquarters of such firms are located. =*'

In one revealing passage the plan noted an additional advantage
to encouraging economic relationships in congressional districts:

The commissions derived from buying their products and other business transac-
tions can be used to fund our activities. We will have the cake and eat it too.**

The subcommittee found numerous ways in which the Korean
Government was able to "have the cake and eat it too." Programs
and activities designed to advance ROK interests were funded
through outside sources, using various means, thereby saving
money for the Korean Government and obscuring the relationship
between the activity and the government. Rice commissions, for
example, helped finance the George Town Club and other Tongsun
Park projects. Through the Korean Cultural and Freedom Founda-
tion and its project Radio of Free Asia, the Korean Government
was also able to guide and control pro-Government activities which
were being financed, wholly or partly, from U.S. sources.^*

**• Subcommittee staff interview of Kim Sang Keun.
" House Ethics 2, p. 1007
»»Ibid., p. 1012.
"Ibid., p. 1013.
»*Ibid.

**See "Moon Organization" ia "Part C-V: Educational, Informational, and Cultural Activi-
ties," pp. 355-366.

104 I

In the same 1970 plan, $380,000 was requested immediately for
contributions to the fall 1970 congressional election campaigns.
Future budgetary needs were to be met as follows:

2. How To Raise the Funds:

(a) The first year (1970): As proposed in the attached paper, $380,000 should
be raised in Korea.

(b) The second year (1971) budget:

(1) Rice imports (Office of Supply and Ministry of Agriculture and Forest-
ry): $100,000-$130,000.

(2) Farming equipment imports such as bulldozers (Office of Supply and
the Agricultural Promotion Corporation): $200,000-$300,000.

(3) M-16 weapons (Ministry of Defense): $100,000-$150,000.

(4) Others: $100,000-$200,000.

Total: $500,000-$780,000.

It is recommended that the 70 percent of the net income — gross income minus
expenses— generated by the Agency-assisted future business activities be allocated
to support activities for diplomacy toward the Untied [sic] States."

The subcommittee was particularly interested in the reference to
the need to raise $100,000 to $150,000 through M-16 weapons, since
the coproduction agreement between Colt Industries and the
Korean Government did not call for any commissions from which
such an amount could be siphoned. However, the subcommittee
learned that in March 1971, Mickey Kim, acting for Park Chong
Kyu, requested a contribution from Colt, ostensibly for the 1971
election campaign of Park Chung Hee. Colt officials initially agreed
and drew a check for $100,000 payable to Mickey Kim, but on the
advice of counsel decided against the contribution."

The 1970 plan also contained a section entitled * 'Diplomacy
Through Offered Intelligence." It defined "offered intelligence" as
«♦ * * intelligence obtained from the other side in return for pro-
viding accurate intelligence of ours to them in order to achieve
specific objectives."^® The stated objective was to provide the
United States with intelligence favorable to Korea, and:

(a) In our diplomacy toward the United States, the most effective approach is to
utilize this type of intelligence, that is, offered intelligence.

(b) By providing the United States with appropriate intelligence advantageous to
Korea, we may effect [sic] them to make judgments favorable to Korea.'^

In addition to influencing U.S. judgments, the plan envisioned
acquiring the capacity to anticipate future U.S. policy:

2. Sensing the United States policymakers' view before policy is formulated.

(a) As explained above, we will be able to approach high officials of the Central
Intelligence Agency and Mr. Kissinger by giving our favorable information about
Korea in such a way that we will be able to assume a role of a bridge between the
two governments.

(b) Through this, the United States side would naturally approach us to sound out
feasibility of their policies toward Korea before the policies are firmly formulated.

(c) When this happens, we will be able to obtain United States plans in advance
and have a chance to evaluate such plans and take appropriate measures.*"

In the 1974 document entitled "The United States Congressional
Delegation's Visit to Korea," there was extensive analysis of the
benefits reaped from past cultivation of Congressmen. The docu-

" House Ethics 2. p. 1015.

"See also "Part C-IV: Economic Relations," p 241

" House Ethics 2, p. 1017.

" Ibid.

" Ibid., p. 1018.

105

merit also reported on a meeting between Tongsun Park and
former Vice President Agnew and included the comment:

While vice president, Mr. Agnew personally participated in the U.S. policy formu-
lation toward Korea and attended the National Security Council meetings for four
to five years, and, thus, he is knowledgeable of the Korean policy of the U.S.
government, in particular of the State Department and the Central Intelligence
Agency. He also knows other secret diplomatic issues.**

The suggestion was that Tongsun Park would be able to obtain
classified information on diplomatic and national security issues by
cultivating Mr. Agnew.

Tongsun Park did make business offers to Agnew and other
former officials in the Nixon and Ford administrations. Park and
Agnew entered into a business relationship in 1974; in 1975 Park
hired former White House aide William Timmons as a public rela-
tions consultant; and in 1976 Park hired former Attorney General
Richard Kleindienst as counsel for his company, Pacific Develop-
ment, Inc. Park explained his friendships with Congressmen and
his overtures to former high-ranking U.S. officials such as Agnew
by stressing his personal business ambitions, which might be furth-
ered by having influential friends and associates.^^

There were numerous indications that personal ambition rather
than patriotic desire lay behind many of Tongsun Park's plans and
activities. It led him to distort and exaggerate the extent of his
influence and ability to carry out missions for the ROK Govern-
ment.«^ Nevertheless, a comparison of the activities and plans de-
scribed in the documents found in Park's home with another KCIA
document and with actual events showed repeated attempts by the
KCIA — some successful — to carry out the stated objectives.

Annual KCIA plans

The subcommittee's investigation revealed that by at least the
mid-1970's the KCIA had annual written plans for operations in
the United States. A copy of one such plan, that for 1976, was
obtained by the subcommittee. Also examined was another plan for
an earlier year. Both plans envisaged the recruitment of Ameri-
cans— including Government officials, Members of Congress, jour-
nalists, scholars, religious leaders, businessmen, and leaders of citi-
zens' organizations — for the purpose of swaying American public
opinion and official policy in favor of the Park Government. Both
plans also called for operations to counteract American and
Korean critics of the ROK Government.

Kim Sang Keun testified that in 1975 Hwang Moon Young, who
had just been transferred to Washington after serving as chief of
the American section at KCIA headquarters, showed him part of
the 1975 plan for operations in the United States. Since Kim's
official assignment involved local Korean residents, Hwang allowed
him to read that section of the plan. According to Kim, it resem-

" House Ethics 2, p. 1034.

•Tongsun Park's business and social contacts with U.S. intelligence officials Slso drew some
attention, as well as some allegations of impropriety. The subcommittee ascertained that at one
point in the mid-1960's one U.S. intelligence official considered Park to be "worthy of cultiva-
tion," but there were no indications of any formal association beyond the frequent informal
social contacts. Similarly, there were allegations of impropriety regarding business relationships
between Park and former U.S. intelligence officials. The subcommittee was not able to discover
any evidence indicating that such contacts involved the agency for whom the officials had
worked.

•* See, for example, testimony of Jay Shin Ryu, House Ethics 1, p. 199.

106

bled the corresponding section of the 1976 plan which the subcom-
mittee showed him.«*

1976 KCIA Plan for Overations in the United States

In September 1977, Sohn Ho Young, KCIA station chief in the
New York Consulate, resigned and came under the protective cus-
tody of the U.S. Government. Testifying before the subcommittee,
Sohn authenticated the written "1976 Plan for Operations in the
United States" which had been shown to him at the beginning of
1976 by Kim Yung Hwan, the KCIA station chief in Washington.^*
Notations on the plan indicated that it had been reported to the
KCIA director and deputy director in December 1975. Sohn said
that it was probably drafted in Seoul in mid- to late 1975, probably
on the basis of information supplied by Kim Yung Hwan. There
were also many similarities between the 1976 plan and the docu-
ments found in Tongsun Park's home, particularly the ''Plans for
Korea's Foreign Policy Toward the United States."

The subcommittee's investigation left no doubt that this was an
authentic KCIA plan. Of all the KCIA documents reviewed by the
subcommittee, the 1976 plan was the most detailed and comprehen-
sive exposition of KCIA objectives in the United States. It was
divided into three main sections, with subsections devoted to oper-
ations aimed at the executive branch. Congress, media, academia,
religious circles, and the Korean-American community, as well as
at North Korean activities. Sixty-five individuals and organizations
were specifically named as targets of influence.

The section on operations in Congress referred to a separate plan
on contributions to congressional campaigns. The 1976 plan also
referred to prior operations: "During 1975 we firmed up the basis
of cooperation with the policy research committee of the Republi-
can Party. (2 representatives and 13 aides visited Korea.)"^^ The
Republican Party does not have a committee named the "policy
research committee"; however, the Korean language has no arti-
cles, definite or indefinite, and makes no distinction between
proper nouns and common nouns, thus making it impossible lin-
guistically to determine from the original Korean document wheth-
er "policy research committee" was a name or a descriptive
common noun. The following facts seemed to indicate that the
reference was to the Republican Study Committee. In 1975, Ed
Feulner, a congressional aide who was staff director for the Repub-
lican Study Committee, was introduced to KCIA station chief Kim
Yung Hwan by Neil Salonen and Dan Fefferman of the Freedom
Leadership Foundation (FLF). In late 1975 Feulner accompanied a
Member of Congress and six congressional aides to Korea. Kim
Yung Hwan had offered to pay for the trip, but Feulner refused,
and it was financed by the Korean-U.S. Economic Council.^' While
in Korea, the congressional aides were often escorted by Lee Young
In, identified as a member of the Foreign Ministry. In reality, he

•« KI-5, pp. 62-63.

•» KI-3, p. 10.

- KI-5, p. 120; also Appendix C-85.

" The Korea-U.S. Economic Council in Seoul is a private organization of Korean and Ameri-
can businessmen for promoting better U.S.-ROK economic relations. See also "Moon Organiza-
tion" in "Part C-V: Educational, Informational, and Cultural Activities," pp. 319-321: 343-346:
369, for more on FLF.

107

was head of the KCIA's American section and would have been
involved in drafting the 1976 plan.««

The 1976 plan also looked to 'Invitation Diplomacy" as a means
of influencing U.S. public opinion and foreign policy, with specific
persons targeted. Many entries in the plan were accompanied by
the amounts of anticipated expenses such as round-trip air fare to
Korea.

I Some of the planned activities were questionable or illegal: con-
tributing to Congressional campaigns (illegal under the Federal
Election Campaign Act); using unregistered agents for covert oper-
ations (illegal under the Foreign Agents Registration Act); implan-
tation of an "intelligence network" in the White House; and infil-
tration" of the Joint Chiefs of Staffs Office of Policy Planning:

(Collect U.S. Far Eastern Military Strategy by infiltration of the Joint Chiefs' of
Staff Office of Policy Planning "

This part of the 1976 plan suggested that the KCIA planned to
obtain classified information about U.S. military strategy. The sub-
committee's investigation uncovered no evidence from which to
conclude that U.S. military secrets were compromised, or that
actual attempts were made by Korean agents to obtain classified
information. Kim Sang Keun said that so far as he knew, KCIA
officers gathered information about U.S. military policies from
public and official sources. Kim concluded:

I don't think there was any sinister plot to get unpublished information from the
offices of the Defense Department.^"

However, Kim did not have responsibility for handling defense or
military matters, and the subcommittee was unable to interview

I KCIA officers who had worked in those areas.

I The subcommittee was aware that such words as ''manipulate,"

' "co-opt," and other terms used in the 1976 plan did not always
connote illegal or improper activities. Sohn testified, for example,
that "neutralize," as used in the plan, meant ''bringing radical
opinion into a more modified, moderate stance"; ^^ "manipulation"
meant "causing somebody to follow one's will"; ^^ and "co-opt"
meant "inducing radical opinions or views to become more moder-
ate views." '^
In the section dealing with the U.S. intelligence community the

! 1976 plan suggested encouraging pro-ROK policies "by supplying
materials concerning ROK and the Northern Puppets" ^* — a con-
cept similar to that of "offered intelligence" mentioned in the 1970
document.

A central theme in the 1976 plan was to prevent and counter
North Korean activities directed at the United States. Some of the
objectives — such as monitoring North Korean agents, liaison with
U.S. agencies, and countering North Korean propaganda— would
not be a threat to U.S. interests or the integrity of U.S. institu-
tions, if carried out lawfully. However, even though the desire of

" Lee is also mentioned on p. 113 of this section as being one of two former KCIA officials who
resigned in the United States in September 1977.
" KI-3. p. 125; also appendix C-85.
'" KI-5, p. 73.
" KI-3, p. 17.
^' KI-3, p. 18.
'» KI-3, p. 18.
"KI-3. p. 125; also appendix C-85.

108

the KCIA to prevent or counter North Korean activity is under-
standable, implementation of some of its plans would constitute an
intrusion into the jurisdiction of Government agencies in this coun-
try and would violate U.S. sovereignty. For example, to the extent
that carrying out the section called "Early detection and frustra-
tion of U.S. Congressmen's contact with the Northern Puppets"
would involve preventing contact between representatives of the
United States and North Korea, it would deny the U.S. Govern-
ment its legitimate prerogatives in communicating with a foreign
government.

In several places in the 1976 plan the terms "pro-North Korean"
and "anti-Government" seemed to be used interchangeably. This
equating of dissent with communism was often found in the KCIA's
approach to Korean residents in the United States. Although, as
noted earlier, there was little evidence of North Korean infiltration
of the Korean-American community, the 1976 plan treated the
Korean community in the United States as if it were an adversary.
Undercover, or "black" (i.e., covertly controlled) agents were to be
recruited, a "black" newspaper published, churches infiltrated, and
covert operations directed toward Korean resident media and aca-
demic circles. One section encouraged activities "causing mutual
alienation and prompting infighting between the anti-government
people and the pro-North people." ''^ South Korea's understandable
preoccupation with North Korea's designs on the Korean Peninsula
no doubt accounted for some of these plans. But the subcommittee
found a pattern showing that the most significant motive behind
KCIA activities involving the Korean community in the United
States was to thwart opposition to Park Chung Hee's government,
whether Communist-inspired or not.

As revealed in its 1976 plan, KCIA intelligence gathering in the
United States was to be closely allied to its other goals of influenc-
ing U.S. public opinion and policy toward Korea and controlling
dissent within the Korean community. Besides monitoring the
North Korean U.N. Observer Mission, the KCIA called for infiltrat-
ing Congress and key executive branch agencies to get information
on U.S. policy. The KCIA also sought to maintain various fronts in
the Korean community.

Implementation of the 1976 plan

Sohn Ho Young testified that he did not know to what extent the
KCIA carried out the 1976 plan, since he was stationed in Houston
until the end of 1976. ""^ Sohn offered the opinion that much of the
plan was exaggerated for bureaucratic reasons and that much of it
was probably never carried out:

• • • I have to agree that much of the plan may not have been carried out. When
the person who made this report went to Korea, he tried to give a picture of his
activities here based on various things he had thought about, but I don't know if
they were carried out or not. A person who has been stationed here, when he goes
back, may insert the names of people in a report because he knows the names even
if he had not met them. He may exaggerate his activities. It goes without saying
that he may to some degree report things without a basis. I think that this can be

" KI-3. D. 135; also appendix C-85.

^« The Houston post was abolished when Sohn left, as part of an overall reduction of KCIA
personnel in the United States in reaction to the scandal.

109

regarded as being a situation in which there is a p)ossibihty that a great deal of this
is exaggerated. "

Kim Sang Keun likewise could not say whether or not the plan
was carried out, and he agreed with Sohn's assessment that the
plan contained exaggerations and probably was drafted to fulfill
bureaucratic requirements. ^®

The subcommittee found evidence to support these opinions that
parts of the 1976 plan were exaggerated so as to impress KCIA
officials in Seoul. Investigation also showed that to a considerable
extent operations planned for 1976 had already been attempted in
prior years. Their inclusion again in the 1976 plan might have been
to impress superiors with the extensive activities contemplated. As
discussed elsewhere, exaggeration seemed to have been a character-
istic of virtually every Korean influence activity in the United
States, as rivals vied for recognition in Seoul. For example, al-
though Tongsun Park had succeeded in compromising some U.S.
officials, he misrepresented the degree to which he was influential
in Washington.

Similarly, the 1976 plan listed projects that in all likelihood were
never seriously considered to be feasible and contained numerous
references to what were actually prior contacts with persons and
organizations in the United States.

Sohn further testified that by the end of 1976, when he began his
assignment in New York, adverse publicity concerning Korean lob-
bying and influence activities had caused the KCIA to adopt a
policy of "low profile" for its agents in the United States:

• * * When this plan was drafted and organized, already the publicity on Tong-
sun Park was at its height and we were under informal instructions to maintain a
low profile in this country and therefore I don't know really; perhaps part of this
plan may have been carried out, but my common sense tells me that this was not
really carried out.'*

U.S. executive branch reports confirmed Sohn's testimony that the
KCIA issued instructions to its agents in the United States to
maintain a low profile as publicity began to increase in late 1976.
This policy of caution would have led to the cancellation of many
of the projects described in the plan.

Nevertheless, the subcommittee's investigation revealed that the
KCIA did attempt — with some success — to carry out operations
identical or similar to those described in the 1976 plan. The 1976
plan provided the subcommittee with an insight into KCIA prior-
ities and operating methods in the United States and confirmed
much of the information received by the subcommittee from other
sources.

Of the 65 persons and organizations mentioned as targets for
influence in the 1976 plan,*® 36 responded to subcommittee inquir-
ies. Of these, 28 had been contacted between 1972 and 1976 in a
manner consistent with the 1976 plan. Many received invitations to
visit Korea, usually extended by either non-KCIA officials or civil-
ians. This was in keeping with the KCIA procedures described by
Lee Jai Hyon and others and as revealed in one of the documents

" KI-3, p. 27.
" KI-5, pp. 73-74.
'• KI-3, p. 22.

•• This number is exclusive of the congressional section, which was referred to the House and
Senate ethics committees.

110

found in Tongsun Park's house. A number of persons interviewed
had been contacted prior to 1976, but not in 1976. This was logical
given the fact that the 1976 plan followed earlier plans and reflect-
ed ongoing relationships, completed operations and contacts.

Many of the individual actions pursuant to the plan appeared
innocuous at the time and only assumed importance when revealed
as part of a broader pattern of KCIA activity. For example, in late
1975, Kim Yung Hwan had asked Charles Kim«^ if he knew anyone
who worked at the National Security Council. Charles Kim an-
swered that he knew Sven Kramer and agreed to set up a meeting
between Kramer and Kim Yung Hwan. Kramer's name subse-
quently appeared in the 1976 plan under the heading "Implanta-
tion of an Intelligence Network in the White House."®* Also target-
ed under this section was President Ford's press secretary, Ron
Nessen. (In 1974, Nessen, whose wife is of Korean descent, learned
through U.S. intelligence channels that he was a target for cultiva-
tion by the KCIA.) ®^ Another target of the plan was Alan Krause,
who worked in the State Department's Intelligence and Research
Bureau; he reported a number of approaches by Koreans which he
interpreted as attempts to recruit him. Several high-ranking U.S.
military officials also received what appeared to be unremarkable
visits or overtures from Koreans in 1975 or 1976; these appeared to
be more significant in light of the objective stated in the plan of
"infiltration of the Joint Chiefs of Staff' to collect U.S. Far Eastern
military strategy.®* While there was no indication that Kramer,
Krause, Nessen, or the military officers had in any way been
compromised, the quoted passage of the 1976 plan was deemed by
the Congressional Research Service to be the most significant por-
tion of the plan, indicating a possible intention to "steal state
secrets." The subcommittee found no evidence that the KCIA had
indeed attempted to steal classified U.S. Government information,
but nevertheless agreed with the Congressional Research Service
that the possibility was cause for concern. ^^

Written evidence of KCIA plans for influence activities in the
United States was made available by a number of sources. The
repetition of themes and even specific details, together with simi-
larities in format and style, supported the conclusion that all-
including the Tongsun Park documents — were prepared by or at
least with the cooperation of KCIA officials. Moreover, the consist-
ent mention of certain activities in these documents, such as con-
tributions to congressional campaigns, strongly indicated consid-
ered Korean Government policy, rather than simply the exaggera-
tions of a Tongsun Park or the bureaucratic tactics of an individual
KCIA officer.

ADDITIONAL FACTORS AFFECTING KCIA INFLUENCE ACTIVITIES

The KCIA's persistence in planning and carrying out influence
activities in the United States can be partly explained by the
actions of U.S. officials and institutions. The success of apparent

•' At that time, Charles Kim was involved in opening the Diplomat National Bank. See "Moon
Organization" in "Part C-V: Educational, Informational, and Cultural Activities," pp. 376-387.
"KI-3, p. 124; also appendix C-85.

"Nessen. Ron, "It Sure Looks Different From the Inside" (Chicago; Playboy, 1978), p. 45.
** KI-3, p. 125; also appendix C-85.
•• See appendix C-84.

Ill

lobbying efforts by other nations using similar techniques, the
direct encouragement by U.S. officials, and the absence of any
serious effort by the executive branch to stop them, all encouraged
the Korean Government — including the KCIA — to believe that
questionable and even illegal activities in the United States would
be both tolerated by the U.S. Government and successful in achiev-
ing ROK Government objectives.®*

In the course of this investigation, the subcommittee found evi-
dence that the Korean Government hoped to emulate the perceived
success of lobbying groups for other nations. Former KCIA Director
Kim Hyung Wook testified that he became interested in the idea of
using Tongsun Park and the George Town Club partly because it
resembled the successful "China Lobby" of Anna Chennault and
others on behalf of the Republic of China. ®^

Written documents also referred to lobbying and influence ef-
forts by other nations. The 1976 KCIA plan contained a reference
to the "Utilization of Jewish lobbyists." *® In one of the documents
found in Tongsun Park's home is the following passage:

VI. Raising the Funds for Diplomacy Toward United States

A. While many developed nations spent some fifteen to twenty million dollars
annually and Israel had been engaged in aggressive activities toward the United
States by mobilizing the formidable influence of her American residents, Korea was
able to establish a second force within the United States Congress with some one
million-dollar funds. »"

The perception that lobbjdsts from other nations were successful-
ly using money and influence in various ways to affect U.S. foreign
policy could only have been reinforced by the direct encouragement
for lobbying given the Koreans by some U.S. officials of both the
executive and the legislative branches. As noted in the section of
this report entitled ''Executive Branch Awareness of Questionable
Korean Activities," executive branch officials stressed to the Kore-
ans the importance of Congress in U.S. Government decisions af-
fecting Korean security and aid.*^

In testifying before the House Committee on Standards of Offi-
cial Conduct, former Congressman Richard Hanna said he had
advised Korean Government officials on the realities of the Ameri-
can political system: the executive branch did not exercise exclu-
sive control over U.S. policy and a change of Presidents did not
necessarily mean a change in congressional outlook.®* He as well as
Cornelius Gallagher and other Congressmen suggested to ROK
Government officials, including President Park, that they develop
more contacts in Congress, following the example of other U.S.
allies whose lobbying had proved effective. During the early 1970's
Congressmen urged President Park to use Tongsun Park for influ-
encing Congress. Two Congressmen urged President Park to name
Tongsun Park as chief Korean sales agent for Public Law 480 rice
sales in which they stood to profit personally. As revealed in the

••The reaction of executive branch agencies to reports of Korean influence activities is
(Uscussed in detail in "Part C-III: Executive Branch Awareness of Questionable Korean Activi-

•'KI-l, p. 22.

- KI-3, p. 121; also appendix C-85.

•• House Ethics 2, p. 998.

•» See pp. 122-124.

•• House Ethics 2, pp. 235-236.

112

House ethics committee hearings, a number of Congressmen sent
letters to Park Chung Hee extolling Tongsun Park's good work in
Congress.

KCIA REACTION TO THE KOREAN SCANDAL/CONCLUSION

In the aftermath of the October 1976 revelations, Yang Doo Won,
KCIA Deputy Director for Security who had been supervising oper-
ations in the United States, was discharged, and President Park
agreed to the recall— recommended by some aides— of most KCIA
officials in the United States, including Kim Yung Hwan and Kim
Sang Keun. The Government also decided to recall Ambassador
Hahm Pyong Choon.

On November 23, 1976, while preparing to return to Korea, Kim
Sang Keun read a story in the New York Times describing the
Hancho Kim operation. Kim immediately decided to defect to the
United States. It is unusual for an official to seek protection from a
government allied with his own; this was only the second time that
a Korean official had done so. From the KCIA's point of view, this
defection was far more serious than that of Lee Jai Hyon in 1973,
because of its potential effect on Agency morale and because of the
information that Kim had. As a result of Kim's action, it was
reported that his superior, Kim Yung Hwan, was considering the
same move. However, headquarters sent a high-level emissary to
convince him to return, which he did.®^

In early December 1976, KCIA Director Shin Jik Soo was re-
placed. The number of KCIA personnel in the United States was
drastically reduced and they were instructed to confine their activi-
ties to collecting information overtly or through contacts with U.S.
officials, and to refrain from any activity that might be considered
coercion, manipulation, or attempts to influence. Sohn Ho Young,
transferred from Houston to New York in this reorganization, testi-
fied that he was instructed to keep a low profile at his new station
and that he did so. Subcommittee interviews with Korean residents
in the New York area confirmed this, and reports from Korean
residents throughout the United States indicated a considerable
decrease in the level of KCIA activity.

In June 1977, former KCIA Director Kim Hyung Wook was
quoted extensively in a New York Times article which described in
detail KCIA influence operations in the United States and revealed
the names of "agents" who had conducted them.®^ At that time
Kim was scheduled to testify before this subcommittee. The Korean
Grovernment, which had been making approaches to Kim for some
time, stepped up its campaigjn to have him return to Korea, go to a
third country, delay testifying, or, at least, not to say anything
damaging to President Park in his testimony. Despite the new low-
profile instructions, this effort was largely conducted through the
KCIA, with Sohn Ho Young running the operation in New York
under detailed instructions from headquarters.** When it failed,
Sohn was recalled to Seoul on August 23. Disillusioned by the
Government's actions amd apparent fear of what Kim might
reveal— including scandals involving high officials— and fearing

•» The New York Times, Dec. 5, 1976.
•» See KI-3, appendix 2, p. 139.
•* Kl-3. appendix 6, pp. 190-205.

113

that he would be punished for knowing too much, Sohn ultimately
defected. Shortly after he had been recalled, Lee Young In, station
chief at the Republic of Korea U.N. Mission for less than a year,
was also recalled because of alleged unauthorized contacts with
Kim Hyung Wook. He apparently feared that the early recall
meant trouble and let it be known that he did not wish to return.®^

Concerned about morale among overseas personnel in the wake
of the reorganization and Kim Hyung Wook's testimony, headquar-
ters sent a mission to Europe to assess the situation. The delega-
tion attempted to assure officers that former connections with Kim
Hyung Wook would not be held against them and that, if they
were recalled to Korea, they should go without fear of punishment.
The delegation found morale bad and thought defections likely.
While the mission was in Europe, Sohn defected on September 16,
and Lee, citing the need to care for a sick child, resigned and
stated his intention to remain in the United States. To be sure that
Lee did not follow in Sohn's footsteps and go to U.S. authorities,
the KCIA station chief in Washington assured Lee that they under-
stood his situation and would help him adjust his status in the
United States.

The subcommittee received no subsequent information on the
morale of KCIA personnel or on the current instructions being sent
to KCIA officials in the United States. By 1977, the KCIA in the
United States appeared to be trying to contain the burgeoning
scandal. Reports from Korean residents indicated that the KCIA
was mgiintaining a low posture and that blatant activities such as
harassment were rare. On the other hand, the number of invita-
tions to Korean- Americans to visit Korea greatly increased. Re-
ports indicated that many new pro-Korean Government groups —
veterans, youth, professionals, et cetera — were springing up in the
Korean-American community. Many members of the Korean-
American community believed that these activities were being or-
ganized and supported by the Republic of Korea Government and
the KCIA as a less obvious, more sophisticated means to influence
Korean and American opinion. The subcommittee found no indica-
tions that the ''low profile" represented anything but a tactical
reaction to events, which could be reversed in the absence of pres-
sure from U.S. authorities. *«

"• Subcommittee staff interviews.

"* Recommendations for this section are incorporated with those for "Executive Branch Aware-
ness of Questionable Korean Activities," p. 157.

114

ni. Executive Branch Awareness of Questionable Korean i

Activities

A key issue addressed by the subcommittee was the extent to
which the executive branch was aware of questionable Korean
activities in the United States. The examination of this issue
begins with a look at the responsibilities of various segments of the
executive branch.

The agencies having primary responsibility to handle the issues
that arose from the various ROK Government plans to influence
and manipulate U.S. policy were the Department of State, the
Central Intelligence Agency (CIA), the Department of Justice, the
Federal Bureau of Investigation (FBI), and the Defense Depart-
ment's National Security Agency (NSA).

Discussed briefly below is U.S. policy regarding the conduct of
representatives of foreign governments in the United States, and
the diplomatic, legal, and administrative remedies available to
these agencies in dealing with the problems created by question-
able conduct on the part of the Korean Government.*

EXECUTIVE branch RESPONSIBILITIES

In 1965, the Senate Foreign Relations Committee held hearings
on the ratification of the Vienna Convention on Diplomatic Rela-
tions.* During these hearings. State Department representatives
described U.S. policy regarding direct foreign lobbjdng of Congress,
the U.S. media, and the U.S. business community. The established
rule of diplomatic conduct was stated to be that diplomatic mis-
sions of foreign governments in the United States should conduct
all business through the State Department. State has advised all
missions that the criterion for maintaining diplomatic accredita-
tion in the United States is that every diplomat must engage full-
time in official diplomatic duties. Any flagrant breach of normal
diplomatic practice is dealt with by the State Department's repre-
sentation of disapproval to the foreign mission. State may also
delete a diplomat s name from the diplomatic list and ask him to
leave the country. The use of press attaches and information offi-
cers and contact with U.S. media are proper diplomatic functions;
however, particular statements or political propaganda may be
objectionable.

A representation of disapproval, however, is not intended to be
applied in the case of nondiplomatic representatives of a foreign
government. Such persons are subject to registration requirements
provided for under the Foreign Agents Registration Act (FARA).^
The purpose of FARA is to protect the national defense, the inter-
nal security, and the foreign relations of the United States by
requiring public disclosure of the relations and activities of persons
acting under the direction and control of a foreign government.
According to its provisions, foreign agents are to register with and
report their activities to the Justice Department. There are specific

' See also "Part E: Activities of Influence by Foreign Governments," p. 427.

* Hearings before the Senate Foreign Relations Committee, 1965, as quoted in "Activities of
'Friendly' Foreign Intelligence Services in the United States: a Case Study," Report of the
Senate Select Committee on Intelligence, U. S. Senate, June 1978, (hereinafter referred to as
"Senate Intelligence Report"), p. 7.

•22U.S.C. 611-618.

115

filing and labeling requirements for the dissemination of political
propaganda.

In addition to FARA, another pertinent law administered by the
Justice Department, the Espionage Registration Act, states in part:

• * • [E]very person who has knowledge of, or received instruction or assignment
in, the espionage, counterespionage, or sabotage service or tactics of a government
of a foreign country or of a foreign political party, shall register with the Attorney
General.* * **

Finally, the Logan Act, also administered by Justice, prohibits
any U.S. citizen who does not have specific authorization from
corresponding with a foreign government or its agents with the
intent to influence the relations of the foreign government vis-a-vis
the United States.* The Logan Act, as well as the espionage stat-
utes mentioned above, carry criminal penalties.

The investigation of all matters involving espionage, sabotage,
and subversion within the United States is the responsibility of the
FBI under its internal security and counterintelligence authority.
Recognizing that the presence of intelligence officers of "friendly"
or allied nations in the United States can result in problems, in
1954 the FBI requested the State Department to inform it of any
intelligence officer acting outside his authorized activities. In gen-
eral, State makes no inquiries as to the duties of foreign diplomatic
officials, although it is aware that some are intelligence officers.
When intelligence officers are performing their generally-^accepted
liaison and information-gathering functions, they usually become
known to executive branch agencies. However, the presence in the
United States of those who are sent in an operational capacity;
that is, to be engaged in covert offensive activities, may go unde-
tected.

According to a Senate report, the National Security Agency
(NSA), which is responsible to the Secretary of Defense, provides
intelligence information gathered by technical means to other in-
telligence agencies. Specifically, part of its mission is to provide
U.S. policymakers with intelligence information gathered from the
interception of foreig^i communications. The NSA does not have
any statutory authority to perform this function but is operating
under a top secret National Security Council directive which autho-
rizes the Director of Central Intelligence to order NSA to intercept
such foreign communications.®

Under the National Security Act of 1947, the CIA was charged
with coordinating the foreign intelligence activities of the United
States abroad, under the direction of the President's National Secu-
rity Council, by correlating, evaluating, and disseminating foreign
intelligence effecting the national security. The act specifically
provides that the CIA has no police, subpena, law enforcement, or
internal security functions.

In the area of counterintelligence,^ the distinction between the
internal security functions of the FBI and the foreign intelligence

• 50 U.S.C. 851-857.

» 18 U.S.C. 953.

•Report of the Senate Select Committee to Study Governmental Operations, Intelligence
Activities and the Rights of Americans, Book HI, Apr. 22, 1976, pp. 736-737.

' According to Executive Order 12036, Jan. 24, 1978, counterintelligence is defmed as "infor-
mation gathered and activities conducted to protect against espionage and other clandestine
intelligence activities, sabotage, international terrorist activities or assassinations conducted [in
the U.S.] for or on behalf of foreign powers, organizations, or persons."

116

functions of the CIA has sometimes been unclear. Close coordina-
tion has been essential because of the need to transfer responsibili-
ty for counterintelligence matters. To avoid gaps where counterin-
telligence matters are concerned and to insure cooperation, a
formal agreement defining the responsibilities of each was drawn
up by the two agencies in February 1966.* Despite the formal
agreement, much liaison was still conducted through informal con-
tacts. However, from February 1970 until November 1972, all infor-
mal routine liaison contacts between the CIA and the FBI were
suspended by FBI Director J. Edgar Hoover. During that period, all
contacts had to be in writing and conducted at relatively high

levels

EXECUTIVE BRANCH REPORTING

As part of its mandate, the subcommittee was directed to study -
the intelligence relationships between the United States and the \
Republic of Korea. In exercising this responsibility, the subcommit-
tee sought to understand how the intelligence communities of each
country functioned regarding matters relating to the other. Much
of the information collected by the subcommittee regarding U.S.
(Government agencies could not be declassified. The subcommittee
had no oversight responsibilities for the U.S. intelligence communi-
ty and therefore did not consider questions relating to the propri-
ety of the actions of U.S. intelligence agencies unless they were
thought to have a direct bearing on the subcommittee's mandate.

The U.S. intelligence community regards itself as an instrument
of U.S. Grovernment policy; it gathers information in response to
the political and military policies and concerns enunciated by the
President, the National Security Council, and the other policymak-
ing departments of the executive branch.

As indicated in other sections of this report, the United States
has been concerned for many years with events on the Korean
Peninsula.* Information concerning improper South Korean activi-
ties came to the attention of the U.S. intelligence community
during the course of its normal duties, and that information was
disseminated to policymakers in Washington. (The response in
Washington to that information is analyzed below.)

The dissemination in Washington of routine reporting is quite
wide. In testifying before the subcommittee, Donald Ranard, former
director of the Office of Korean Affairs at the State Department,
said:

When highly classified reports arrived on my desk from the Embassy, I knew then
that they were also on desk^ in the National Security Council, and I knew also that
they were on desks above me [in the State Department]. • • • [0]thers were being
alerted edmost at the same time I was.***

Reporting on matters deemed particularly sensitive has a more
limited distribution, going only to several key officials. Some of the
reporting on the activities of Tongsun Park and other questionable
Korean activities was subject to this type of limited dissemination.

• Report to the President by the Commission on CIA Activities, June 1975.

• See "Part B: Review of Korean-American Relations," and "Part C-I: Security and Political
Affaire."

'• "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess.. Part 4,
Mar. 15, 16, 21, 22; Apr. lU 20; and June 20, 1978 (hereinafter referred to as "KI-4"), p. 91.

117

One of the problems of the so-called "Korean scandal," in hind-
sight, was that the collection of information regarding Korean
efforts to influence U.S. policy and officials was never considered a
major policy concern. Officials in Washington received reports on
questionable Korean activities, but few of them regarded such ac-
tivities as serious enough to warrant pulling all the information
together or to encourage the U.S. intelligence community to
expand its reporting on these activities. It should also be noted that
information about actions taken by the ROK Government to influ-
ence U.S. officials and policy was not collected as a matter of
course.

One of the problems contributing to the lack of response from
Washington may have been the distinction whereby certain types
of information were disseminated to one agency of the U.S. Govern-
ment but not to others. Information regarding counterintelligence
activities in the United States is sent to the FBI and very often is
not disseminated to other policymaking departments and agencies.
Early reports concerning questionable influence activities, includ-
ing Tongsun Park's connections with various Congressmen, were
di^eminated to other departments and agencies, but not to the
FBI; information concerning the control of congressional aides by
the KCIA was sent to the FBI but not to the State Department. It
might also be noted at this point that segments of the intelligence
community had no formal avenue, other than the FBI, for sending
classified information to the Attorney General and the Justice
Department.

Although actions in Washington may not have been sufficient,
there was a great deal of concern among the U.S. officials at the
Embassy in Seoul about the questionable Korean Government ac-
tivities, and some discussions were held on the possibility of "neu-
tralizing" them. These officials from time to time remonstrated
privately with their Korean contacts, pointing out the deleterious
effects such activities could have on Korean-American relations.
However, despite the private warnings — to which the Korean offi-
cials politely agreed — the activities did continue and, as has been
shown, did have a deleterious effect on Korean-American relations.

Based on declassified U.S. Government documents, public testi-
mony, subcommittee interviews with both former and current U.S.
officials, and recollections of private individuals, this section traces
the increasing awareness on the part of the executive branch of
questionable Korean activities and examines how the various agen-
cies of the executive branch interacted with one another to exercise
their authority and responsibility as the information arrived in

Washington.

EARLY INFLUENCE EFFORTS

During the period from about 1963 to 1969, various factions
associated with the Government of the Republic of Korea, includ-
ing official and nonofficial organizations and individuals, were in-
volved in isolated activities aimed at improving Korea's image in
the United States. Early U.S. Government reports on these activi-
ties implied that the Korean Government was involved in and
employing questionable practices to achieve this goal. As early as

118

1962, executive branch officials were aware of the KCIA presence
in cities throughout the United States.

One ROK official identified was Kim Kyong Eup, who was as-
signed to Washington to evaluate the U.S. Government's reactions
to the Park Chung Hee regime and to monitor the activities of
ROK Ambassador Chung II Kwon." In 1962 and 1963, KCIA at-
tempts to gain the support of Korean residents in the Los Angeles
area for the Park regime became known. Apparently no represen-
tations were made by the U.S. Government regarding this informa-
tion.

A February 26, 1963 report ** stated that KCIA founder and
director Kim Jong Pil had organized the Unification Church (UC)
of Sun Myang Moon for use sis a political tool. A former U.S.
official stationed in Korea told subcommittee staff that shortly
after the 1961 coup, Kim Jong Pil had stated that he intended to
"organize and utilize" the UC for Korean Government political
purposes. According to a December 1964 report, the UC had formed
a front organization known as the Korean Cultural and Freedom
Foundation (KCFF) as "the first step toward organizing [the UC] in
Washington."" Pak Bo Hi, former military attache at the ROK
Embassy in Washington, was to return to the United States to run
it.»*

During 1963-64, the Korean Government, under the aegis of a
non-Governmental organization, was also formulating a proposal to
set up and staff a structure in Korea to be used for anti-Communist
activities. The Asian Peoples Anti-Communist League Freedom
Center (APACL-FC) was established and from the beginning had
full concurrence and financial support of the ROK Government.
Some officials identified as supporters of the project were President
Park, Prime Minister Choi Du Sun, and Kim Jong Pil."

A plan was made to raise funds for the Freedom Center in the
United States. In the summer of 1963, Cho Dong Ha, representing
both the APACL-FC and the Korean Government, came to Wash-
ington to arrange a fundraising campaign to be carried out by a
U.S.-based, tax-exempt organization." Shortly after Cho's arrival,
Yang You Chan, a former ROK Government ambassador to the
United States and subsequently a U.S. resident, recruited three
prominent Washingtonians — a banker, a lawyer, and a retired
Army officer — to be the original incorporators of the KCFF in
Washington, D.C." The stated purpose was to establish a tax-
exempt foundation to promote mutual understanding, respect, and
good will between the United States and Korea. Yang also got
retired Adm. Arleigh Burke and other prominent Americans to
serve on the board of directors. Williaun Curtin, a retired U.S.

" Chun^ had been assigned to the United States under an earlier Kore£in administration;
some factions surrounding President Park, including the group led by Kim Jong Pil to whom
Kim Kyong Eup was a close aide, were suspicious of Chung.

'» "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d Sess.,
Supplement to Part 4, March 15, 16, 21, and 22, 1978 (hereinafter referred to as "KI-4,
Supplement"), p. 458.

» KI-4, Supplement, p. 459.

'* See the Moon Organization," in "Part C-V: Educational, Informational, and Cultural
Activities," pp. 323-325; 355-366.

'• KI-4, Supplement, p. 147.

'• A subsequent FBI investigation (see KI-4, Supplement, p. 171) established that Cho's stay in
Washington was subsidized by Tongsun Park.

" KI-4, Supplement, pp. 56-60 and 72-78.

119

Army officer, was selected to serve as president of the foundation
and charged with the day-to-day operations. In early 1964 Yang
discussed future plans for the KCFF with Col. Pak Bo Hi, at the
time still the military attache at the ROK Embassy in Washington.

By March 1964, Yang, Curtin, and Pak proposed a fundraising
campaign in the United States for the APACL Freedom Center, to
be sponsored by the KCFF. In October 1964, Pak Bo Hi returned to
Korea and, with Yang's assistance, obtained a discharge from the
ROK Army. He returned to Washington in January 1965 and as-
sumed responsibility as director and vice president of KCFF."

In 1964, the activities of William Curtin and others in the pro-
posed fundraising had come to the attention of the Bureau of
Intelligence and Research of the State Department, which notified
the Internal Security Division of the Justice Department. This in
turn precipitated a comprehensive, long-term investigation by the
FBI to determine if any of the principals were violating the FARA.
State wanted to know if the KCFF and Curtin, among others, were
registered as agents representing a foreign government. If not,
were their fundraising activities such that they should register?
The FBI investigation established the facts outlined above. In 1966,
Justice concluded that FARA had not been violated because the
fundraising never took place, and closed the case."

There was no indication that U.S. Government agencies received
any further information of possible influence activities until an
August 10, 1966 report. It said that the KCIA's 7th Bureau had
been given the task of working out a proposal for the "re-establish-
ment'^ of Riadio of Free Asia (ROFA).2o ROFA was a project of the
KCFF which planned to raise money in the United States to enable
it to broadcast anti-Communist propaganda to North Korea from a
station in South Korea. The operation was reported to be tightly
controlled by the KCIA and to be the outcome of discussions among
KCIA-Washington, KCIA Director Kim Hyung Wook, and Yang
You Chan. The report concluded that the 7th Bureau was expected
to discuss the matter with Yang.

The subcommittee established that in the late summer of 1966,
Pak Bo Hi, Yang You Chan, and an American named Lawrence
Mays arrived in Seoul to arrange with the ROK Government for
ROFA to use the Korean Broadcasting Service facilities. Mays had
recently been appointed international chairman of ROFA; at the
same time Kim Kyong Eup, the former aide to Kim Jong Pil
previously assigned to Washington, had been named operations
director of ROFA."

Mays had three conversations — on August 15, 16, and 17, 1966 —
with U.S. officials at the Embassy in Seoul. These were noted in
Embassy reports to the State Department in Washington. The re-
ports described concern on the part of U.S. officials regarding the
character of the persons involved in ROFA, that the names of

"'KI-4, Supplement, p. 87; See also the "Moon Organization" in "Part C-V: Educational,
Informational, and Cultural Activities," pp. 323-325; 355-366.

»• See KI-4, Supplement, p. 28, for the FBI's investigative report on this matter.

*»Ibid., p. 461. The use of the word "re-establishment" probably refers to the fact that U.S.
Government agencies had at one time considered setting up a Radio Free Asia similar to Radio
Free Europe. While the idea was never fully implemented, some U.S. officials felt that the
KCFF was attempting to establish a connection with the U.S. Government in the minds of
prospective contributors by using the name Radio of Free Asia.

" KI-4, appendix 7, pp. 598-610.

120

prominent Americans were being used, and that the Korean Gov-
ernment might exercise editorial control over the broadcasts, even
though ROFA was a privately funded U.S. organization."

In several interviews and in a sworn statement to subcommittee
staff," Mays said that he met with Ambassador Winthrop Brown
on two of these occasions. Brown stated that he believed that Kim
Kyong Eup was a KCIA official and that Mays should get rid of
him. Mays reported Brown's dissatisfaction to Yang and Pak;
within a few hours Kim was replaced.

The subcommittee found no evidence that Brown's conversation
was reported through regular State Department channels. Further,
there were discrepancies between Mays' statement and the State
Department memoranda," particularly regarding who initiated the
meetings; the participants; and the content of the discussions. It
was clear, however, from KCFF minutes, that Kim, though just
appointed operations director, was removed on August 15, 1966 by
General Coulter, who had replaced Admiral Burke as chairman.**
Coulter sent a letter to Seoul appointing a new operations director,
Kim Dong Sung, a former ROK Minister of Information who had
been an adviser to the KCIA.** Mays also told subcommittee staff
that during his Korean visit, Pak Bo Hi took him to meet the
director of the KCIA and that he and Pak had a clandestine
meeting with Sun Myung Moon and a member of the ROK Nation-
al Assembly whom Mays later identified from photographs as Kim
Jong Pil.*^

Upon his return to the United States, and pursuant to Ambassa-
dor Brown's request, Mays went to see Samuel Berger, the Deputy
Assistant Secretary of State for East Asian and Pacific Affairs. The
State memorandum of their conversation on September 7, 1966
revealed that Mays told Berger that after he met with Sun Myung
Moon and the Korean National Assemblyman, it became clear that
the KCFF's real goals were to sponsor fundraising projects in the
United States to raise money for furthering the religious and politi-
cal objectives of the Unification Church in Korea."

Following the meeting. Mays called on retired Adm. Arleigh
Burke, who had resigned the previous year because of his reserva-
tions concerning KCFF's operations and involvement in the
APACL-FC project. When Mays told him his concerns, Burke
called William Sullivan, director of the FBI's Domestic Intelligence
Division, and in Mays' presence repeated the story. Mays himself
was never contacted by the FBI. The subcommittee tried to deter-
mine why the FBI failed to follow up, but Sullivan refused repeat-
ed requests for informal interviews.** FBI files provided in response
to a subcommittee request did not contain any information on
Mays' story, nor did staff interviews with Sullivan's subordinates
reveal anything. ROFA and its principals continued to be of con-

*» KI-4. Supplement, pp. 483-486.

" KI-4, appendix 7, p. 598.

»* KI-4, Supplement, pp. 483-490.

"Ibid., pp. 635 and 641; See also the "Moon Organization" in "Part C-V: Educational,
Informational, and Cultural Activities," p. 357.

•• KI-4. Supplement, p. 479

" KI-4. appendix 7, pp. 626-628 and 634-635.

- KI-4, Supplement, p. 488.

** Compulsory process was not instituted. Sullivan was killed in a hunting accident in Novem-
ber 1977.

121

cern to State Department officials because of the fundraising in the

United States, the alleged connection with the ROK Government,

i and ROFA's broadcasting policies. From 1966 through 1968, several

J U.S. agencies were reporting on ROFA's activities and relationship

I to the Korean Government.

I By the end of 1969, several things had become clear from that
j reporting.'** The program content of ROFA broadcasts was com-
I pletely under the supervision and control of the ROK Government;
the KCIA's 7th Bureau was very influential in ROFA activities,
! even to the extent of supplying some of the program content. The
broadcasts clearly reflected Korean Government policy, and ROFA
was not paying for the use of ROK Government facilities. Further,
ROFA broadcast on frequencies that could not be received in North
Korea. All this information indicated to U.S. officials that funds
solicited in the United States were being misused. State's fear was
that a scandal could arise that would taint those prominent Ameri-
cans supporting the organization.

While the executive branch agencies were following the activities
of ROFA, they also began to report on the activities of Tongsun
Park. Most of this reporting was given the standard, routine dis-
semination to various other executive branch agencies and depart-
ments in Washington, including CIA headquarters, the National
Security Council, the State Department, and the Defense Intelli-
gence Agency of the Defense Department. Within State and De-
fense, the official receiving the report further disseminated it
within his department. As indicated earlier, this routine distribu-
tion is thus quite wide.

In March 1968, it was reported that Korean Prime Minister
Chung II Kwon had requested that KCIA Director Kim Hyung
Wook contact Tongsun Park in Washington and give him assist-
ance. Kim ordered his station in Washington to do so. During the
subcommittee's hearings in June 1977, Kim Hyung Wook testified
to a similar set of events; however, he placed the time as 1966 and
Tongsun Park as having been in Korea.'* Chung II Kwon had
introduced him to Tongsun Park and said that Park was "not a bad
guy" and Kim should treat him well. Shortly thereafter, according
to Kim, Tongsun Park volunteered his services to the KCIA. While
it is unclear what type of assistance the March 1968 reporting was
referring to, it was clear that from this point on, Tongsun Park
would deal directly with the KCIA and its director without going
through the Prime Minister. By late fall of 1968, Tongsun Park's
entry into the rice business and his close relationship with key
Korean Government figures were known.

In December 1968, the U.S. Department of Agriculture (USDA),
responsible for administering the Public Law 480 program," made
routine inquiries of the FBI, the CIA, and other executive branch
agencies to determine if Tongsun Park had any connections with
the Korean Government. Due to bureaucratic delays, USDA did
not receive all the information until approximately April 1969. The

»« XI-4, Supplement, pp. 461-466 and 476-500.

" "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 1st sess.. Part
1, June 22, 1977 (hereinafter referred to as "KI-1"), pp. 19-20.

"See "Part C-IV: Economic Relations," p. 162£f.

122

responses were all negative, and Tongsun Park became a sales
agent for Public Law 480 rice sales to Korea."

Throughout the first half of 1969, executive bremch reporting
continued to describe Tongsun Park's interests in U.S.-Korean
commodity transactions. Additionally, it began to reveal Park's
involvement with certain U.S. Congressmen. Tongsun Park was
characterized as having used "unscrupulous techniaues to bring
Congressmen and Koreans together in Washington, ' probably a
reference to Park's use of his George Town Club as a lobbying
command center.'*

During the early part of 1969, the Koreans were troubled by the
new administration s policies regarding East Asia. There was in-
creasing concern that financial and military aid might be cut. At
hearings held by the subcommittee in March 1978, Marshall Green,
Assistant Secretary of State for East Asian and Pacific Affairs
from April 1969 through 1973, stated that in 1968, just prior to
Nixon's taking office, he had met with the President-elect to dis-
cuss what the new policy toward East Asia would be. Early in the
new administration. Green journeyed to East Asia to brief leaders,
including Park Chung Hee, on Nixon's policies and to reassure
them that the United States still had "vital interests in East Asia"
and would continue to honor its defense commitments; neverthe-
less, the American public was beginning to question U.S. assistance
in some regions and felt that other countries should assume a
greater share of the responsibility for their security.'* These points
were enunciated by Nixon in tJuly in a statement that became
known as the "Nixon" or "Guam Doctrine".'* Ambassador Green
recalled that when he first presented these views to Park Chung
Hee, the Korean leader had understood that the Nixon Doctrine
would develop greater support on the part of Congress, the Ameri-
can people, and the press for administration policies.

Information available to the executive branch indicated that the
Koreans immediately realized the implications of the Nixon Doc-
trine and the significant effect that congressional attitudes and
U.S. public opinion would have on its application. For example,
shortly after the enunciation of the Nixon Doctrine, a prominent
Korean National Assembly member proposed to Park Chung Hee
that the ROK invite U.S. Congressmen and journalists to Korea
and that a special officer be assigned to the Korean Embassy in
Washington to maintain liaison with the U.S. Congress.

Throughout the latter half of 1969, executive branch agencies'
reports continued to describe Tongsun Park's increasing activities
in both Houses of Congress. Raportedly, Park, with the assistance
of a Senator and a Congressman, was arranging a reception for
former KCIA Director Kim Hyung Wook during a planned visit to
the United States. Tongsun Park's use of a Korean employee of
Voice of America to tape favorable remarks about Korea made by
Congressmen attending a party at the George Town Club and

»» The CIA qualified its respwnse by stating that it had no "derc^atory" information on Park.
See KI-4, appendix 4-F. p. 565.

" See appendix C-53, State Department document dated Feb. 5, 1969. U.S. executive branch
agencies deleted the names of Members of Congress and congressional staff members from
material provided the subcommittee, since that information was deemed relevant only to the
investigations of the House and Senate Ethics Committees.

» KI-4.PP. 21-22.

•• See "Part C-I: Security and Political Affairs," p. 59.

123

Park's alerting the Korean media to listen to the VOA broadcast
was also made known. This presumably was not only a Korean
propaganda tactic, but also a device to enhance Park's own imajge
with ROK Government officials by demonstrating how influential
he was with U.S. Congressmen.

By January 1970, U.S. officials in Washington had received infor-
mation on a Korean national described as being close to Tongsun
Park who was coming to the United States to contact as many
CJongressmen as possible with a proposal to increase U.S. rice sales
to Korea.^^ Tongsun Park himself was reportedly working closely
with a Senator and two Congressmen on this. It was also said that
Prime Minister Chung II Kwon had sent Tongsun Park to the
United States to influence Congressmen regarding the pending $50
million supplemental militarv assistance appropriation. While
Park may have been in the bad graces" of several ROK politi-
cians, he still enjoyed the "good graces" of the Prime Minister.
About a week after the receipt of this information, a senior U.S.
official at the Embassy in Seoul wrote a memorandum to the
record detailing a conversation he had had with Tongsun Park,
who said he was involved in lobbying both for more Public Law 480
rice sales and increased military assistance.

U.S. officials in Korea provided Washington with a great deal of
information on the factionalism among various high-level Korean
Grovernment figures. In March 1970, a USIA official noted that the
ROK Ambassador to the United States, Kim Dong Jo, was compet-
ing with other Koreans — probably including Tongsun Park — to
obtain additional military aid for Korea, apparently both for pa-
triotism and for personal profit and prestige. Much of this lobbying
followed the private announcement to President Park in March
1970 of proposed U.S. troop withdrawals. During his appearance
before the subcommittee. Ambassador Green described the Korean
Government reaction:

This caused a Ipt of anguish in Seoul, which was not entirely allayed by our
assurances that we would seek additional funds for ROK force modernization. There
were other assurances, many high-level consultations, but we could, of course, give
no absolute guarantee that required modernization funds would be forthcoming."

Elaborating, Green said that although the ROK Government was
aware that troop withdrawal had been under consideration since
1963, the decision to proceed came as a shock. To allay Korean
Government fears, U.S. officials reiterated that the U.S. Govern-
ment would try to provide substantially higher military assistance
for the fiscal years 1971 through 1975 and would increase economic
assistance through the Public Law 480 program. The Koreans re-
mained skeptical. As Ambassador Green explained:

Koreans are sufficiently knowledgeable about the ways of Washington to know
that Congress is the one that votes the funds, and that no one can guarantee what
Congress will do, so that was a difficult point for them to accept, and we of course
had to tell them that we could make no guarantees. That was up to the Congress.'*

Donald Ranard, former Director of the Office of Korean Affairs
at the State Department, testified that the political consequences of

" At this time, approximately 80 percent of the moneys gained by the Korean Government
from the sale of Public Law 480 grain was being used for defense expenditures. See also Part
C-rV: Economic Relations," pp. 207-214.

" KI-4, p. 22.

••KI-4, pp. 27-28.

124

the proposed troop reductions on internal Korean politics were
significant. President Park was facing a difficult election in April
1971. His popularity was based largely on his administration's per-
ceived "special relationship" with the United States. Park feared
that his opponent, Kim Dae Jung, an active and articulate politi-
cian, would seize on troop reduction to demonstrate that no such
relationship existed. Park also believed that Nixon was using troop
reduction in Korea to solve his own political problems. In July
1970, the Korean Government sent a delegation of National As-
semblymen to the United States to persuade U.S. officials and
Congressmen to agree to a list of ROK demands prior to any
negotiations on troop withdrawals.

However unwittingly, U.S. officials were steadily pointing the
ROK Government in the direction of Congress. They discussed
troop reduction as a foregone conclusion, while stating that Con-
gress would decide on compensatory military modernization aid. At
the time, certain factions centered around high-level Government
officials and politicians already had agents of influence in place in
Washington— best exemplified by Chung II Kwon's and Kim Hyung
Wook's sponsorship of Tongsun Park's activities.

ROK GOVERNMENT ATTEMPTS TO CONTROL INFLUENCE EFFORTS

The deep concern of the Korean Government over U.S. policy
was apparent from executive branch reports describing several
meetings held in the Blue House in the fall of 1970.*° The purpose
of the meetings was to discuss taking over control of the agents of
influence of the various factions and coordinating and directing the
activities in the most productive manner.

The first description of such a Blue House meeting was revealed
in an early fall 1970 executive branch report. Chaired by President
Park, the meeting involved a discussion of a proposal to organize a
"civilian lobbying group" and was attended by high-level Blue
House officials. The plan called for centralizing all ROK lobbying
efforts in Washington under Tongsun Park. He would direct those
Korean Government representatives in Washington already en-
gaged in influence activities, such as Lee Sang Ho (also known as
Yang Doo Won) of the KCIA, General Kang Young Hoon of the
Research Institute on Korean Affairs, and Pak Bo Hi of the KCFF.
The goal of lobbying efforts was to influence U.S. decisionmaking
on troop reduction and modernization aid.

At this time Tongsun Park was regarded as a protege of Prime
Minister Chung II Kwon and former KCIA Director Kim Hyiing
Wook, both of whom had supported many of his activities. Park
Chong Kyu was regarded as a longtime enemy of both Chung and
Kim and apparently transferred this enmity to their protege. It
became known that Tongsun Park was accused of having received
over $200,000 in rice commissions in 1969 while failing to contrib-

•• These meetings came to be described by the press as "the Blue House meetings." On a CBS
News Special ("Anatomy of a Scandal," broadcast Apr. 3, 1978), former Ambassador William
Porter was asked if the United States had had listening devices in the Blue House. He replied,
"I was told that it had stopped before my arrival ' ' * I gave a specific order that it was not to
be renewed • • • ". Director of Central Intelligence Admiral Turner was quoted in a Washimrton
Port article of Aug. 10. 1977 ("Turner Denies U.S. Spying in South Koreas Blue House, ' p.
A-12) as flatly rejecting press reports of electronic spying on the Korean Presidential residence:
There were no tapes and no bugs, and I'm speaking for the CIA, the NSA, or any other U.S.
intelligence agency."

125

ute the standard 50 percent to the ruling Democratic Republican
Party. Apparently due to the various objections, President Park
tabled the plan and instructed Park Chong Kyu to prepare a
proposal to be submitted at another meeting.

Subsequently more details became available to the executive
branch — that the plan originally proposed was to be carried out
under the aegis of a research organization to be controlled by
Tongsun Park. The proposed budget was approximately a quarter
of a million dollars.

The subcommittee, through independent interviews and exami-
nation of public documents, established that in 1970 Tongsun Park
organized a research group named the Conference for. the Develop-
ment of Free Institutions (CDFI), which was incorporated in Wash-
ington, D.C. on September 23, 1970, within a few weeks of the first
Blue House meeting. Its purpose, as stated in the incorporation
papers, was to promote mutual understanding between the legisla-
tures of Korea and the United States. However, the subcommittee
had reason to believe that CDFI was one of the entities whose
activities the Blue House had discussed coordinating and control-
ling. As early as March 13, 1970, several months prior to incorpora-
tion. Speaker of the House John F. McCormick circulated a Dear
Colleague" letter encouraging congressional endorsement of an or-
ganization called CDFI. The original endorsers numbered 36 Mem-
bers of Congress and 11 others, including lawyers, academics, and
congressional staffers. The subcommittee determined through in-
terviews with some of the endorsers that Kim Kwang, an aide to
Congressman Cornelius Gallagher and a relative of Tongsun Park,
had assisted Park in obtaining these endorsements. The subcom-
mittee was not able to establish that CDFI undertook any activities
after September 1970."

At a later Blue House meeting, the earlier plan was shelved.
Park Chung Hee appointed a special study group to review all
ROK lobbying efforts and to prepare an overall plan to coordinate
them. The study group recommended the formation of an informal
"foreign policy review board" which would insure Blue House con-
trol over the plans and activities of the various Korean organiza-
tions and also that such activities would be coordinated. The board
was set up and it was determined that Korean lobbying efforts in
the United States should have a lower profile and that the board
itself would fulfill the function of directing and controlling these
activities. It was reported that several high-ranking officials contin-
ued their already established unilateral activities.

In October and November 1970, at the same time that the
Korean Government was formulating its plans for intensifying and
coordinating influence activities in Washington, a congressional
delegation visited several countries in Asia. One of the members of
that group, Kim Kwang, had apparently been identified by the
State Department as the Korean national close to Tongsun Park
mentioned a year earlier as a Korean lobbyist. Kim was then
working as an aide to Congressman Gallagher, who was slated to
become chairman of the Subcommittee on Asian and Pacific Af-
fairs. He had previously been on the staff of Congressman Hanna,

** On Sept. 11, 1972, CDFI's certificate of incorporation was revoked due to failure to file the
required annual report. See appendixes C-55 and C-56, for incorporation papers.

126

who was involved in rice deals with Tongsun Park. Both Hanna
and Gallagher were closely associated with Park.

At the time of the congressional visit in late 1970, the State
Department in Washington received a series of cables from its
Embassies in Australia, Japan, and Thailand expressing concern
that a Korean national, Kim Kwang, traveling with the delegation
was requesting classified briefings on Asian matters.** The various
Embassies urgently requested State's guidance on dealing with '
him. State replied that the Embassies should show Kim the courte-
sies appropriate for a congressional employee without giving him
access to classified information. The documents indicated that offi-
cials at State had been tracking Kim's activities for some time;
they had speculated that he was working for the KCIA and was
subordinate to Tongsun Park.*'

Contempx)raneously, a KCIA official named Kim Sang Keun and
two other KCIA officers were reported to have arrived in Washing-
ton under diplomatic cover to support ROK lobbying activity.

At around the same time, Pak Bo Hi returned to Korea bearing
60,000 letters which Park Chong Kyu had arranged for President
Park to sign. These were then mailed to Americans thanking them
for their contributions to ROFA and their support for the Korean
Government. This type of activity was criticized by Senator J.
William Fulbright, chairing hearings of the Senate Subcommittee
on U.S. Security Agreements and Commitments Abroad in Febru-
ary 1970. At that time. Ambassador William Porter testified re-
garding the State Department's knowledge of the activities of the
KCFF and ROFA. Although reports dated as early as 1967 had
established that ROFA was using the broadcast facilities of the
Korean Broadcasting Service (a Government-owned and operated
station) free of charge. Porter said State had no knowledge of this.

The reason for Senator Fulbright's criticism was a letter, dated
December 8, 1969, that had been addressed to a number of promi-
nent Americans, including Senator Fulbright, which solicited funds
for ROFA. It was signed by Yang You Chan, identified as former
ROK Ambassador to the United States. Fulbright described the
letter as an attempt by the Korean Government to propagandize
the American people. He speculated that this type of activity could
have resulted in another $50 million in military aid to the ROK
without the approval of the administration or the Budget Bureau.
Fulbright further stressed that KCFF's aims were not consistent
with the foreign policy goals of the United States and that the
State Department should be aware of its activities. Porter testified
that he had conveyed to the Korean Prime Minister the Senator's
objections to Yang You Chan's activities in the United States.**

The January 14, 1970 minutes of a meeting of the executive
committee of KCFF included a letter dated January 7, 1970 from
Yang You Chan to William Horning, one of KCFF's founders. Yang
told Homing he was resigning because:

« KI-4. p. 88.

♦» Kl-4, appendix 1-J, p. 512.

♦* "U.S. Security Agreements and Commitmentfi Abroad," hearings before the Subcommittee
on U.S. Security Agreementa and Commitments Abroad, Committee on Foreign Relations, U.S.
Senate, vol. II, Feb. 24. 25, and 26. 1970 (hereinafter referred to as "Symington hearings"), p.
1687.

127

I am officially Ambassador at Large for the Republic of Korea and President Park
has me in his special confidence and assigns me to many special governmental
missions, such as lobbying for the 50 million dollar special military assistance to
Korea, by the U.S. Congress. While I am following my president's instructions as a
government official, I sometimes find myself in a political environment. I do not
want KCFF in any way to be misunderstood by anyone as having a political purpose
in its activities. As a Korean government official (even though not accredited by the
U.S. government) it is not wise to have the position as chairman of KCFF — much as
I relish it. You know, Bill, that I love the organization and really do not wish to
avoid any responsibility.*'

Yang asked Homing if he would be willing to accept the position.
Homing accepted. On January 14, 1970, Yang foraially relin-
quished his position to Horning and was elevated to honorary
chairman. Although Yang had severed his official connections with
the KCFF, its financial records indicated that he continued to be
reimbursed for expenses incurred on behalf of KCFF as late as
1975, the year he died.

As a result of the U.S. Government's awareness of ROK plans to
intensify lobbying operations in the fall of 1970, State instructed
Ambassador Porter to take certain actions in Seoul. The actions
taken by Porter were reflected in a classified letter sent to Wash-
ington which read in part:

• • • In connection with your letter which deals with ROK intensification of
lobbying efforts in Washington, I went into this subject at length, first with the
Foreign Minister on October 13, and today again with the Prime Minister during
our weekly luncheon.

I used the extensive material provided in your letter and its enclosures, I think to
good effect. Chung seemed disturbed to hear that we took a serious view of these
goings on, and that our legal people were preparing a text which if sent would urge
the Koreans and some other embassies to stay within bounds.

Porter indicated that the Embassy would continue monitoring the
situation from Seoul, and further stated:

The George Town Club, I gather, was to be a focal point of their new effort under
the aegis of Tongsun Park. The Prime Minister inquired whether Tongsun Park was
one of the activities we have in mind. * * •

Donald Ranard testified that starting in late 1970 until he left
State in 1974, he had admonished the Korean Embassy several
times on the importance of limiting the conduct of its diplomatic
activities to accredited Korean officials. He emphasized that Tong-
sun Park and others engaged in similar activities were liabilities.
Ranard believed that the ROK officials with whom he dealt regard-
ed the issue as very sensitive, particularly as it pertained to Tong-
sun Park. It was also his impression that ROK Embassy officials in
Washington had very little control over Tongsun Park because of
his high-level contacts in Seoul.** Contemporaneous documents of
Ranard's examined by the subcommittee revealed that he had dis-
cussed the problems of lobbying by nonofficial Koreans and ROFA
with Korean officials in Washington. Regarding ROFA, Ranard
stressed the issue of the letters signed by Park Chung Hee.

Beyond these representations to Korean officials, the State De-
partment also considered circulating a "diplomatic note" to warn
all foreign diplomats that activities intended to influence congres-
sional deliberations on matters of material interest to their govern-
ments would be unacceptable. However, the note would not have

'See appendix C-54.
'KI-4, p. 81.

128

addressed the activities of nondiplomatic representatives. In the
end, State decided to deal with problems on an individual basis and
did not circulate the note.

In late December 1970, for the first time the State Department
approached IRS and the Justice Department in connection with the
improper activities of ROK nondiplomatic representatives in the
United States. State asked Justice to review the status of ROFA
under the Foreign Agents Registration Act (FARA). At the same
time, it request^ that IRS review the organization's tax-exempt
status, but gave no reason for the request.*^ In its response. Justice
identified ROFA as a project of the KCFF and concluded that it
could not be construed an agent of a foreign principal within the
meaning of FARA. IRS stated that it had no record of a tax-exempt
determination for ROFA; the matter was apparently not pursued
further.** The subcommittee determined that the tax-exempt status
was held by the parent organization, KCFF, and therefore IRS
would have had no record of ROFA.

In early 1971, the U.S. Government became aware of another
aspect of improper Korean activities. According to Ranard's testi-
mony, Congressman William S. Broomfield, on a trip to Korea, told
Embassy officials that Tongsun Park had offered him and several
other Congressman $1,000 each in campaign contributions. Broom-
field turn^ the offer down in the presence of others.** This was the
first indication the subcommittee found of a report to executive
branch officials that Tongsun Park was offering campaign contri-
butions to Congressmen.

Around the same time, more definitive information was provided
to Washington on the activities of KCFF and ROFA. ROFA was
exploiting the sensitive issue of POW's in Vietnam to raise funds
in the United States which were then used to support Korean
Government lobbying activities. Further, the KCFF was bjrpassing
the Korean Embassy in its dealings with U.S. Congressmen. *°

As a result of Tongsun Park's offer to Congressman Broomfield
and his continuing efforts to arrange congressional trips to Korea,**
Ambassador Porter in Seoul and Deputy Assistant Secretary Win-
throp Brown in Washington agreed to try to have the Korean
Government "recall" Tongsun Park. It was decided that this could
best be arranged by Porter in Seoul. Ranard explained that since
Tongsun Park had direct connections with highly placed officials in
Seoul, the ROK Embassy in Washington was powerless to control
him."

Ranard recalled that when Ambassador Porter raised the matter
with President Park, his reaction was, "American Congressmen tell
me when they visit here that Tongsun Park is very effective in

" KI-4. Supplement, pp. 506 and 532.

*• KI-4, Supplement, pp. 509 and 534.

•• KI-4. p. 83.

•• KI-4, Supplement, pp 502-503 and 527-529.

»' Other nonofficial Koreans such as Suzi Park Thomson were also involved in bringing U.S.
Congressmen to Korea. A Korean-bom naturalized U.S. citizen. Ms. Thomson had worked in
the offices of several Congressmen, and by the end of 1970 was working in the office of House
Speaker Carl Albert She was also mentioned in the KCIA's 1976 plan (see "Part C-II: Intelli-
gence Activities and Plans." p 106ff and "Investigation of Korean-American Relations," hear-
ings before the Subcommittee on International Organizations of the Committee on International
Relations. 95th Cong.. 1st sess.. Part 3. Nov. 29 and 30. 1977 (hereinafter referred to as "Kl-3"),
pp. 121 and 123 (where her name appears as "Congressional Aide G").

" KI-4. pp, 84-85.

129

Washington." Ranard said that State interpreted the President's
statement as an admission that Tongsun Park had some kind of
connection with the Korean Government.*^ It was Ambassador Por-
ter's recollection, supported by the memories of others, that as a
result of his representations, Tongsun Park did in fact return to
Korea and remain for a time in the early part of 1971.** However,
in interviews with subcommittee staff, Park denied that assertion.

In early 1971, apparently as a result of Porter's representations
and the attention that was focused on lobbying activities of Korean
nationals in Washington, President Park ordered a halt to all
uncoordinated activities, such as those being engaged in by Pak Bo
Hi, Tongsun Park, and Row Chin Hwan (former chairman of the
Korean residents association in Washington). He reviewed in detail
their activities, as well as those of two congressional aides, and
attributed them to the machinations of various factions within his
Grovernment. It was reported that all these lobbying activities could
have taken place without his knowledge because a high-ranking
member of his Government had considerable influence over the
President's Blue House staff.**

One of the factions from which Park Chung Hee might have
wanted to dissociate himself was that of Prime Minister Chung II
Kwon, the mentor of Tongsun Park, who in the early part of 1971
was the subject of unfavorable publicity in both Washington and
Seoul.** However, there were other possible reasons for the Presi-
dent's desire to dissociate himself from Chung. For example, other
reporting indicated that large sums of money given to Chung by
Tongsun Park and earmarked for Democratic Republican Party
coffers were retained by Chung personally.

U.S. ATTEMPTS TO COUNTER KOREAN INFLUENCE EFFORTS

Ranard testified that during the 1970 hearings. Senator Ful-
bright had become so piqued at ROFA's interference in U.S. foreign
policy and fundraising tactics that he asked State to ascertain
whether the organization should be required to register under
FARA. Consequently, when Ranard became State's Director of
Korean Affairs in April 1970, ROFA and Pak Bo Hi were subjects
of considerable interest. Ranard also said that the names of Tong-
sun Park, Kim Kwang, and Suzi Park Thomson figured prominent-
ly in executive branch reporting.*^ State's suspicions had been suffi-
ciently aroused that by late 1970 they had inquired of IRS and
Justice regarding ROFA's status, as mentioned earlier. By early
1971, Ranard had become so concerned about other Koreans be-
sides those involved with ROFA that he held a series of discussions
with Deputy Assistant Secretary Brown and Assistant Secretary
Marshall Green. They then took their concerns to Under Secretary

" KI-4, p. 84.

'* KI-4, p. 69.

** President Park's professed lack of knowledge about these activities would be more credible
had the executive branch not been aware the previous fall of his attendance at Blue House
meetings where the coordination of some of the activities had been discussed.

*«The publicity concerned Chung In Suk, a Korean woman whose murder in Seoul under
suspicious circumstances had created a scandal. She had been connected with a number of high-
ranking ROK (Government ofFicials. According to some allegations received bv the subcommit-
tee, she had been the mistress of Chung II Kwon; according to others she had been the mistress
of President Park. She had lived in the Washington area for a time with Row Chin Hwan as her
guardian.

" KI-4, pp. 89 and 95.

130

of State for Political Affairs U. Alexis Johnson. He in turn, some-'
time after April 1971 when State had received the responses of
Justice and IRS, discussed the matter informally with Attorney
General John N. Mitchell. Mitchell advised Johnson to submit all
the details in writing to him personally so that Justice could evalu-
ate the situation and make recommendations. The task of compil-
ing the information was given to Ranard.

Johnson sent a letter to Mitchell on June 8, 1971, enclosing a
memorandum prepared by Ranard, classified secret, which summa-
rized the reporting gathered from various sources, including State's
own observations, on ROFA and its principal officers. The memo-
randum showed that ROFA was State's primary concern. There
was also brief mention of Tongsun Park's questionable activities.
Kim Kwang and Suzi Park Thomson were not mentioned."

The subcommittee's examination of subsequent communications
between State and Justice indicated that the Internal Security
Division of Justice, including the Registration Section which had
responsibility for KARA, also believed that State's main focus was
ROFA. However, when Justice suggested that State agree to
narrow the investigation of ROFA to FARA violations, State re-
plied that it wanted a "full scale investigation" to determine if
ROFA had violated any Federal statute, including FARA. Justice
also asked State if it had any objection to the FBI's interviewing
Pak and Yang. State replied no, and Justice instructed the FBI to
do so. Later the FBI agent in charge of the case interpreted this as
an instruction limiting the interviews to those persons only.

The main thrust of the FBI investigation that Justice requested
was the issue of a possible FARA violation by ROFA; the request
referred to an investigation of "Radio of Free Asia: Registration
Act." A review of the documents suggests that it was almost an
afterthought that Justice asked the FBI to look into whether Tong-
sun Park should have registered under the espionage acts (50
U.S.C. 851-857, mentioned earlier) and the possibility of mail fraud |
by ROFA or its principals. *• |

Because of the so-called "third agency rule" regarding dissemina- (
tion of information,*** Justice did not send to the FBI the State \
Department's secret memorandum which, in addition to summaries
of reports from several agencies, contained some information that
State itself had developed. State did, however, arrange for the FBI
to receive one other executive branch agency's information on
ROFA. No such arrangements were made for the information of
other agencies. As a direct consequence, the FBI did not receive
information as comprehensive as that which State originally trans-
mitted to Justice.

Although the letter from Justice to the FBI requesting the ROFA
investigation was not transmitted until November 1, 1971, th
other agency's information on ROFA was sent in September. A few
days earlier, the FBI received additional information characterized

••All documentation available on these events is contained in KI-4, Supplement, pp. 531-» :•-

••KI-4, Supplement, pp. 551-,572.

••Executive order dated May 17, 1972. states: "D. Consent of Originating Department to
Diasemination by Recipient. Except as otherwise provided by sec. 102 of the National Security
Act of 1947, 61 Stat. 495. .50 U.S.C. 403, classified information or material originating in one
Department shall not be disseminated outside any other Department to which it has been made
available without the consent of the originating E)epartment."

131

as counterintelligence information which identified two named con-
gressional aides as being under the control of the KCIA.

By August 1971, the U.S. Ambassador in Seoul was also express-
ing concern regarding the two congressional aides. In a message to
Ranard, the Korea Country Director in the State Department, the
Ambassador noted that Suzi Park Thomson was a congressional
staff member currently in Seoul accompanying a congressional
delegation. She had also been in Seoul a few months earlier at the
time of Congressman Hanna's visit, during which time she had
been in contact with Tongsun Park. The telegram went on to state
that there were strong indications that in the past Korean Govern-
ment officials and the KCIA had used her, or intended to. The
Ambassador advised that U.S. Congressmen visiting the ROK be
cautioned about her. Other internal State documents indicated that
as early as August 5, 1971, some State officials had assumed that
Kim Kwang was being investigated by the FBI (although there was
no indication that the Bureau ever did investigate Kim).**

The information concerning the two congressional aides, on its
receipt by the FBI, was referred to the Nationalities Section of the
Domestic Intelligence Division — the same section that was to be
responsible for the ROFA investigation. In fact, the same FBI
official in this section, William McDonnell, was to handle all mat-
ters relating to Korea.

McDonnell testified to the subcommittee that when he received
the information regarding the two congressional aides, he initiated
a series of telephone calls to the originating agency. In the first,
McDonnell requested permission to send the information to the
President's Special Assistant for National Security Affairs, Henry
A. Kissinger. He was given the go-ahead to send it to both Kissin-
ger and Attorney General Mitchell. In another conversation the
following day, according to McDonnell, he was told by the originat-
ing agency that the source of the information was so sensitive that
the FBI could not use it in any investigative action. McDonnell
made notations of these conversations on the document he had
received.**

In preparing the package for Kissinger and Mitchell, McDonnell
wrote a note to his superiors which accompanied the communica-
tions. In the note, he indicated that the communications repeated
other material, in addition to the information on the two congres-
sional aides, of a similar or related nature which he had received
from another intelligence agency and originally transmitted to
them on July 16, 197 1.*^ McDonnell's communications were ap-
proved by the FBI hierarchy and signed by Director J. Edgar
Hoover for transmittal to Kissinger and Mitchell on September 30,
1971.**

In November 1971, the originating agency once again transmit-
ted to the FBI counterintelligence information in which reference
was made to the earlier communication in which the two congres-
sional aides had been identified as being under KCIA control. The
following statements were also made: Tongsun Park had made

"See KI-4, appendix 4-M, p. 516. The statements indicating a belief that the FBI was
investigating Kim were not declassified at the time of pubhcation of those hearings.
" KI-4, pp. 125-126: appendix 3-A, p. 551.
•» See appendix C-63.
**KI-4, appendixes 3-B and 3-C, pp. 552-553. See also appendixes C-64 and C-65.

35-508 O - 78 - 10

132

payments to a named Congressman with money received in rice
deals- Tongsun Park, while not a KCIA agent as such, was acting
under KCIA direction; the Korean Government had spent large
sums'of money to develop control over journalists, both Korean and
American, in the United States; and the Blue House had been
directly involved in the contribution of several hundred thousand
dollars to the 1968 Democratic national campaign.

The subcommittee discovered that separate elements of the intel-
ligence community received information that a campaign contribu-
tion of several hundred thousand dollars had been made to the
1968 Presidential campaign of the late Hubert Humphrey. Due to
the sensitivity of the allegation and the large amount of the al-
leged contribution, the subcommittee embarked on an extensive
investigation to determine whether the contribution had been
made. The subcommittee was unable to make this determination,
although there were strong indications that the Korean Govern-
ment intended to contribute to the Humphrey candidacy in 1968.

In the fall of 1977, the subcommittee received information from
an element of U.S. intelligence suggesting a substantial contribu-
tion had been made in 1968. This information was not received by
that element until the early 1970's.

At a hearing in March 1978,^* the subcommittee released a de-
classified summary from another element of U.S. intelligence
which stated that the Korean Government contributed several hun-
dred thousand dollars to the Democratic National Committee in
1968. The information had been received even earlier by this ele-
ment.

In pursuing the initial information, the subcommittee learned
that the source was considered very reliable. The subcommittee
interviewed several individuals who were privy to the information
at that time, and their recollections varied as to the amount of the
contribution. However, most recalled that the reason the informa-
tion did not surface before the early 1970's was that President Park
had been upset that his Government had contributed to the losing
party in 1968. This point was strengthened by a June 1978 report
by the Senate Intelligence Committee, which stated:

* * * U.S. intelligence also learned that the KCIA was investigating an "uncon-
firmed" report said to be circulating in Washington about an alleged substantial
Korean contribution to the 1968 Democratic presidential campaign, and the possibil-
ity that persons in the Republican Party might use the information in retribution
when the Watergate investigation was finished.^

The subcommittee disclosed that the first intelligence element
determined not to pursue the matter further, and it was decided by
those responsible to make this information available to the second
intelligence element. Subsequent interviews revealed there was no
record of the information being forwarded to or received by the
second element.

As previously stated, the second element had received similar
information at an earlier date from a source considered generally
reliable. Unlike the first element, the second sent the information
to Washington. As revealed in the March 1978 hearings, the FBI
sent the information to the Attorney General and the President's

" KI-4, p. 123 and appendixes 3D-3E, pp. 554-555.
•• Senate intelligence report, p. 15.

133

National Security Adviser but no investigative action was taken.®^
In sum, two members of the intelligence community in the early
1970's received similar information from reliable and separate
sources.

The information provided by the intelligence community stated
that a contribution had been made, but did not provide further
details beyond that statement. Inquiries revealed no detailed infor-
mation on how the contribution might have been made and to
whom.

The subcommittee questioned individuals who were aides to
Humphrey when he was vice president as v/ell as campaign offi-
cials who worked for the 1968 Humphrey campaign or the Demo-
cratic National Committee. None of the individuals indicated any
knowledge of Korean interest or participation in that campaign.
None of the campaign officials recalled contributions of Korean
origin, nor did the subcommittee's examination of 1968 campaign
records reveal any contributions that could be traced to the ROK
Government.

An examination of Korean Government preferences in the 1968
U.S. election indicated that the ROK Government favored Hum-
phrey as the successor to President Johnson. This preference was
based on the likelihood of Humphrey carrying forth the commit-
ments promised to South Korea by President Johnson. It was fur-
ther reinforced by the fact that Richard Nixon was making state-
ments implying that if elected he would alter the nature of the
U.S. commitment to its Asian allies.®*

Kim Hyung Wook, who was director of the Korean CIA at the
time of the alleged contribution, stated that he had no knowledge
of such a transaction and that one could not have been made
without his approval. Likewise, Tongsun Park told the subcommit-
tee he was not aware of a contribution, though he was well aware
of rumors to that effect. Park told the subcommittee that the
rumors ranged from contributions of $100,000 to $400,000 to Hum-
phrey and that the ROK Government had contributed to both the
Democrats and the Republicans that year. Both Kim and Park
expressed their belief that the ROK Government felt more comfort-
able with Humphrey than with Nixon in the 1968 campaign. Re-
garding his own contribution to U.S. Presidential campaigns. Park
has testified that in 1972 he contributed either $5,000 or $10,000 to
Senator Humphrey's Presidential primary campaign and $25,000 to
the Nixon candidacy. However, of the 1968 contribution Park
stated that "I certainly do not have direct knowledge."*®

The subcommittee was unable to establish whether a contribu-
tion was in fact made. The evidence available suggests the ROK
Government wanted Humphrey to be Johnson's successor, that
Tongsun Park, working on behalf of the ROK Government, contrib-
uted to the subsequent Presidential campaigns of both Nixon and

" KI-4, pp. 127-130.

•• See also "Part C-I: Security and Political Affairs," p. 59.

•• "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
nation£Ll Organizations of the Committee on International Relations, 95th Ck)ng., 1st and 2d
sess., Part 7, June 22, 1977; July 20 and Aug. 15, 1978; "Korean Influence Inquiry," executive
session hearings before the Senate Committee on Ethics of the U.S. Senate, 95th Cong., 2d sess..
Mar. 14, 15, 16, 17, 22, 23, Apr. 10, 11, 27, 1978, vol. I, p. 42; subcommittee staff interviews with
Tongsun Park. See also "Part D-Vl: Special Problems with Tongsun Park, Kim Hyung Wook,
and Kim Ki Wan, p. 421."

134

Humphrey, and that the two intelligence elements received this
information from sources they considered reliable. However, there
was no evidence available to determine who actually delivered the
contribution if one was made, how it was made, or to whom it was
made. The subcommittee did determine that neither intelligence
element was asked to obtain more information on the Korean
contribution to the 1968 Presidential campaign.

Returning to the consideration of the FBI's investigation of
ROFA, McDonnell transmitted the orders for the investigation to
the Washington field office on November 11, 1971. It has been
noted that concurrently with his receipt of information from a U.S.
intelligence agency on ROFA, McDonnell was receiving other infor-
mation regarding questionable Korean activities. For example, the
November information referred to one of the individuals— Tongsun
Park— who was named in the Justice Department request for the
ROFA investigation. However, that additional information was not
sent to the agents in the field office who were to conduct the ROFA
investigation. McDonnell's testimony was that he had been told by
the originating agency that no investigative use of the material
could be made. However, a review of internal documents at the
originating agency, as well as an interview of the official who had
sent the information to the FBI, indicated that the originating
agency had not placed any restrictions on the investigative use of
that information.^^ Officials of that agency told subcommittee staff
in classified interviews that their practice was to include any re-
strictions on use of information in the body of the written commu-
nication; this had not been done in the September and November
1971 items. They further pointed out that the originating agency
was particularly sensitive, due to previous misunderstandings, to
keep a clear written record of all interaction between the two
agencies. Finally, the official who had prepared the communica-
tions stated that he had sent the information to the FBI because of
its clear investigative interest. His statement was supported by his
superiors who reviewed the communications prior to transmittal.

Going back to a related set of events, on the same day (June 8,
1971) that Under Secretary Johnson's letter and secret memo on
ROFA were sent to the Attorney General, the House Subcommittee
on Asian and Pacific Affairs, chaired by Congressman Gallagher,
was beginning hearings in executive session on the military mod-
ernization plan for Korea. During their testimony, General John H.
Michaelis and Ambassador Porter discussed classified material. At
later, open sessions. Profs. Robert Scalapino and Gisbert Flanz
testified. Flanz was a former consultant to the Korean Govern-
ment, Scalapino an academic regarded as sympathetic to the ROK.
Gallagher's aide, Kim Kwang, whom U.S. officials had identified in
December 1970 as helping to prepare for the hearings, had asked
Flanz and Scalapino to testify.^^

On the first day of the hearings, an executive branch agency
received a report which stated that Kim Kwang was passing classi-
fied information from Gallagher's subcommittee to the Korean Em-
bassy in Washington. By mid-June, other reports indicated that

^« See also KI-4, p. 131.

" Cable from U.S. Embassy, Canberra, to Department of State, dated Nov. 10, 1970, cited in
KI-4, p. 88.

135

Kim Kwang was considered to be in the same category as Tongsun
Park — both had close ties to ROK Government officials and both
were used to further ROK interests. Ranard testified that he had
at that time held a meeting with his staff and representatives of
other agencies to determine a course of action. Deputy Assistant
Secretary Brown advocated warning Gallagher of the Korean Gov-
ernment's penetration of his staff, but the other agency officials
advised against this, because the Congressman might, inadvertent-
ly or not, disclose his knowledge.

Ranard testified that the report was ''highly reliable, important,
and very sensitive," " he recalled that it had indicated that KCIA
headquarters in Seoul had instructed the KCIA station chief in
Washington to instruct Kim Kwang to influence the hearings so
that the results would be in the ROK's best interests. Rmiard
further testified that during the meeting in his office he was ad-
vised that there had been a previous report on the same matter
which he had apparently not seen. At that point Ranard had
adjourned the meeting and requested that the earlier report be
provided to him prior to another meeting. At the next meeting,
Ranard testified, the other officials said they could not discuss the
matter with him any further. Ranard assumed this meant it was
being handled at a higher level. ^^

A Senate report summarized an intelligence report furnished to
the FBI in July 1971 by a U.S. intelligence agency:

A named Member of the House of Representatives and a named member of his
staff had been cooperating with the KCIA, and the Congressman had received
"payoffs" for assisting the Korean government before a House committee.^*

There was no evidence that the FBI took investigative action
pursuant to the information. An analysis of FBI Agent McDon-
nell's memoranda indicates that the information was disseminated
on July 16, 1971, and repeated along with other information on
September 30, 1971, to Attorney General Mitchell and National
Security Adviser Kissinger. Information of such sensitivity usually
carries a caveat from the originating agency that no investigative
use of the information can be made. The reference to a "payoff to
a Congressman for having assisted the ROK Government before a
House committee accounts for the intelligence officials' reluctance
to warn Gallagher of a KCIA penetration of his subcommittee.

The seriousness with which the FBI regarded this information is
reflected in an internal memorandum dated July 14, 1971, with an
addendum dated July 15, 1971. The addendum states that if Mitch-
ell or Mardian believed it was advisable to do something — the
nature of that "something" was deleted from the copy provided to
the subcommittee — they should advise the Bureau as to the
grounds for doing it. The next sentence notes that under Presiden-
tial powers vested in the Attorney General, he can authorize doing
it only "to protect the Nation against attack, to obtain foreign
intelligence, to protect national security information, to protect
against the overthrow of the Government, and any other clear
danger to the structure of the Government." Below the typed por-
tion of the memorandum was a handwritten note by Director J.

^» KI-4, p. 92.

" KI-4, pp. 91-93.

** Senate intelligence report, p. J 6.

136

Edgar Hoover which said, "Yes, but I will do so only on request of
[Attorney General], not Mardian." ^*

While these are criteria for instituting a national security inter-
cept, the subcommittee was unable to establish whether anything
else was done with respect to instituting such an intercept. Mar-
dian, in an interview with subcommittee staff, stated that he had
no recollection of ever having received information pe^aining to
Korean lobbying, Tongsun Park, or KCIA operatives in congres-
sional offices. He explained that the Attorney General and the
Director of the FBI had not included him in discussions about the
disposition of that kind of information. However, the subcommittee
had copies of FBI documents which dispute Mardian's contention.'^

With regard to the meeting Ranard called in his office concern-
ing the reporting, neither the records nor the recollections of one of
the agency's official'- at the first meeting coincided with Ranard's
recollection that a second meeting was held. The subcommittee was
unable to resolve the issue because the original reporting agency
refused to provide access to it or to provide details of its dissemina-
tion. The FBI, also a recipient of the report, took refuge behind the
"third agency rule" and refused to provide the subcommittee with
the substance removed from the sanitized documents.'^

Analysis of the chronology, together with information developed
by the subcommittee, suggested that when State requested the
ROFA investigation in 1971, it was responding in part to congres-
sional pressure. In February 1970, when Ambassador Porter had
appeared before Fulbright, the Senator admonished him to "keep
an eye on'' tax-exempt organizations for violations of FARA. Conse-
quently in September 1970, when Pak Bo Hi repeated the same
t)rpe of "questionable practice" '® by sending out 60,000 letters to
U.S. citizens from Park Chung Hee, State reflected its concern in
its reporting. By December, State was making inquiries of IRS
regarding ROFA's tax-exempt status and of Justice on its FARA
status. At the end of 1970 State did not have any new, compelling
information beyond what it had had earlier. Apparently Senator
Fulbright's admonition to State provided the necessary impetus for
them to initiate some action.^'

Although the information about Tongsun Park was purposely
included in State's request for an investigation of ROFA in order to
broaden the scope of that investigation,®^ the information did not
accurately reflect the prominence of Park's activities in the reports
in State's possession. Additionally, State did not include the activi-
ties of Suzi Park Thomson and Kim Kwang in their request for a
"full scale investigation."

At the time of its June 1971 letter to Justice, State was already
aware of Kim Kwang's connections with Tongsun Park. Neverthe-
less, when it received additional and more definitive information at
the very time it was requesting that Tongsun Park be investigated,
it did not send the new information to Justice. The subcommittee
was not able to establish whether or not State was aware of the

" See appendix C-60.

'• See appendixes C-57, C-59, C-60, C-62.

" See appendixes C-60, C-61, C-62.

^* Senator Fulbright's characterization, see Symington hearings, p. 1690.

" See, for example, KI-4, Supplement, p. 502, paragraph 5.

•• KI-4, p. 100. The State request is at KI-4, Supplement, pp. 539-544.

I 137

of July 1971 information on a congressional aide that had been sent

to the FBI.
er- Regardless of any shortcomings in compiling and transmitting
:^ information to Justice, it was clear that State regarded the activi-
:r. ties of various unofficial Korean representatives to be improper
i(j and possibly illegal. From the subcommittee's analysis of the infor-

0 mation sent, it was clear that State was taking the other agencies'
'-^ reports on those activities seriously.

g The letter of June 8, 1971 of Under Secretary Johnson to Attor-
p ney General Mitchell sought guidance on how to proceed.®^ Justice
;.^ chose instead to focus on FARA, which was treated as little more

1 than a registration and recordkeeping requirement. The attitude of
.. Justice officials was reflected in an internal memorandum in which
f it commented on State's concern about ROFA as merely "a thorn
5 in the flesh and a potential source of embarrassment." ^^ However,
y Ranard testified:

y * • • I was deeply concerned that we were involved here with an organization
that might well be involved in a violation of security of the United States or an
organization involved in criminal acts * * * I do not think it is a fair judgment by

• whoever wrote this memo to characterize it as simply a concern that these people

3 were a "thorn in our flesh." They were more than that."

, The subcommittee was unable to discover any indication that Tong-
' sun Park's activities were considered separate and apart from
' those of ROFA — irrespective of Justice's decision to investigate his
" activities under the Espionage Act.

^' During hearings which dealt in part with the Justice Depart-
? 'ment's handling of the ROFA investigation, James C. Hise, former
"^ chief of the Registration Section, testified that a lack of personnel
' and expertise required the Registration Section to handle requests
'' according to a system of priorities. The more experienced personnel
^ handled cases involving unfriendly countries and the distribution
' of propaganda that could be damaging to internal security and
^ national defense. The Republic of Korea was not considered a high
i priority compared to "iron curtain" countries. It was also Hise's
' j opinion that the Registration Section itself had a very low priority
' within the Justice Department's Internal Security Division and
had even been considered for elimination.
As mentioned earlier, the letter from Assistant Attorney General
J Mardian to the FBI Director requesting the ROFA investigation
I had not limited the Bureau to interviews of Pak Bo Hi and Yang
3 You Chan. It merely stated that the State Department had no
I objection to their being interviewed. However, in a note attached to
i I the investigation request which went to the Washington field
office, McDonnell instructed the investigating agent not to inter-
view any ROFA personnel other than Pak and Yang. He noted that
he had received this instruction from Hise over the telephone on
November 4, 1971.**

Hise testified that he had no recollection of any such conversa-
tion and could not speculate as to why he would have put such a
restriction on interviews. Hise said that if there had been such a
conversastion, he might have advised against interviewing the

•• KI-4, Supplement, p. 539.

" KI-4, Supplement, p. 555.

"KI-4, p. 101.

•* KI-4, Supplement, pp. 568-569 and 573-575.

138

prominent Americans on the ROFA letterhead." The perceived
restriction on interviewing persons other than Pak and Yang was
just one in a series of restrictions imposed on either the use of
information or the investigative techniques to be employed by the
FBI.

As for the investigation itself, it appeared to have taken more
time to decide what to do than it took to do it. At best, the
investigation conducted by the Washington field office of the FBI
could be described as perfunctory. It consisted of a check of public
and FBI records and an interview of Pak Bo Hi. Yang was not
interviewed, according to the field office report, because of his
advanced age — a decision apparently based solely on Pak Bo Hi's
assertion that Yang was old and unwell.

Likewise, the FBI investigation of Tongsun Park was limited to
comments made by Pak Bo Hi, even though Pak stated that he was
not well acquainted with Park. Specifically, Pak told the FBI that
Park was a prominent Korean businessman who operated oil tank-
ers and was one of the founders of the George Town Club in
Washington. Pak claimed that he had no information to indicate a
connection between Tongsun Park and the Korean Government.

There was no indication in the Bureau's investigative report that
it addressed the mail fraud allegation. The FBI apparently did not
conduct any indepth audit of KCFF's or ROFA's fundraising activi-
ties to determine if funds were being used for the stated purposes.
On the contrary, they accepted Pak Bo Hi's assertion that the
KCFF had recently been audited by IRS in connection with its tax-
exempt status. It is possible that the IRS might have conducted a
different audit had they been made aware of the allegations under
investigation."

Considering some of the handicaps and perceived restrictions
under which the FBI investigators were operating, they did make
some constructive suggestions in the cover memo to their report.
FBI headquarters, however, did not forward them or other informa-
tion to Justice. That other information was the results of the
earlier 1964-66 FBI investigation of the KCFF. The subcommittee's
examination of this file disclosed that a comprehensive, long-term
investigation of KCFF had been conducted between 1964 and 1966
for possible violations of FARA. It detailed the relationships be-
tween the Korean Government-sponsored APACL Freedom Center,
the intentions of Pak and Yaing to use the KCFF to raise funds for
the project, and also Tongsun Park's relationship to Cho Dong Ha,
the Korean Government representative of APACL-FC. The sub-
committee was unable to find any evidence that FBI investigators
had ever consulted this earlier report.

In December 1971, when the FBI submitted its investigative find-
ings to the Registration Section at Justice, Hise was no longer
chief Nevertheless, he characterized the investigation as an inad-
equate response to the Justice Department's request. He further
testified that had he had knowledge of the 1964-66 KCFF investiga-
tion, it would have influenced his decision regarding the need for
further investigation in 1971 because "it would have shown us the

••KI-4. p. 116.

•• The complete FBI report on its 1971 investigation of ROFA is contained in KI-4, Supple-
ment, pp. 577-607.

139

extent and scope of KCFF activities in this country." *' Hise also
said that it would not have been unusual for the Registration
Section to request further investigation in order to provide Justice
with sufficient information to formulate a legal opinion.

Justice documents indicated that on March 16, 1972, Acting At-
torney Greneral Kleindienst closed the case without any further
investigation, and the State Department was so notified.

During the course of its investigation, the subcommittee learned
that in November 1971, KCFF and ROFA officials became aware of
the efforts of the State Department to discourage Congressmen
from being connected with ROFA. As a result, Donald Miller, a
fundraiser and public information officer for ROFA, contacted
Richard Walsh, an attorney with the Washington, D.C., law firm of
Corcoran and Rowe, with whom Miller had dealt previously regard-
ing KCFF and ROFA legal matters. Miller wanted to know if there
was any legal basis for preventing the State Department from
engaging in these activities. He suggested to Walsh that informa-
tion from the CIA might be the origin of State's concern „ Walsh
brought Robert Amory, an attorney with that firm and a former
CIA official, into the discussion. Amory and Walsh agreed to assist
KCFF and ROFA, and on November 24, 1971, Amory sent Pak Bo
Hi a letter outlining terms for their retainer.

Subcommittee staff interviewed Amory to determine the scope of
his activities and to find out if any of them had influenced the FBI
investigation. It was determined that between December 17, 1971,
and January 3, 1972, a period contemporaneous with the FBI inves-
tigation, Amory contacted William E. Nelson, then head of the Far
Eastern Division of CIA; Winthrop Brown, then Deputy Assistant
Secretary for the Far East; and Marshall Green, then Assistant
Secretary of State for the Far East. His purpose was to ascertain
the problem and to try to resolve it. From the outset, Amory made
it clear to Miller that he might uncover derogatory information.

Regarding Nelson, Amory said that he met with him and, after
explaining his interest, asked if he could obtain unclassified mate-
rial that would help him understand the ROFA problem. Several
days later Nelson called to say that circumstantial evidence indi-
cated a close tie between ROFA and the Korean Government. As
an example, he said that ROFA was being given free use of KBS
broadcast facilities. Of Brown, Amory said that although he was an
old friend, he "clammed up" and advised Amory to have nothing to
do with KCFF or ROFA. He indicated that ROFA was then under
investigation by the Department of Justice concerning its relation-
ship with a foreign power. Shortly thereafter, Green canceled his
appointment, saying that he would not add anything to what
Brown had already said.

Amory said that it was not until April 4, 1972, that he contacted
then-Deputy Attorney General Kleindienst, who had been a former
student of his at Harvard. He asked Kleindienst to expedite the
investigation and suggested that it was unfair not to inform ROFA
of the reason it was being investigated. It was not until sometime
in July or August that Deputy Attorney General A. William Olsen
called sa3dng that the investigation had been concluded and no

" KI-4, p. 115.

140

further action would be taken. This was at least 4 months after
Kleindienst notified State that Justice had closed the case. On
August 3, 1972, Amory wrote Pak Bo Hi advising him that he had
been "confidentially advised on the highest level" of that fact.

The officials whom Amory contacted were interviewed by the
subcommittee staff. There was no evidence that Amory's inquiries
had any effect on the outcome of the ROFA investigation.

Approximately 1 month after the FBI had submitted its investi-
gative report on ROFA and Tongsun Park to Justice, they received
additional counterintelligence information from the same agency
that had provided the September and November 1971 information.

This report stated that a named Congressman, who had previous-
ly sought campaign contributions from President Park Chung Hee,
had recommended to the President not only that Tongsun Park be
put in overall charge of influence and lobbying efforts in the
United States, but should also be named chief ROK agent for rice
purchases from the United States." The FBI handled this informa-
tion in the same fashion as the previous intelligence. Again it
added the caveat that the source was so sensitive that any investi-
gative use was precluded. Dissemination was limited to the Attor-
ney General and the National Security Adviser.

On March 21, 1978, the subcommittee received sworn testimony
from former Attorney General Mitchell which included discussion
of these counterintelligence matters. Mitchell testified that he re-
called the first memorandum, dated September 30, 1971, which
stated that two congressional aides were under the control of the
KCIA. The information had surprised him sufficiently that he had
made a personal visit to the House Speaker, in whose office one of
the aides was then employed. Mitchell said he raised the issue of
that aide with the Speaker but did not discuss the second aide or
the Congressman for whom he worked.

In an interview with subcommittee staff, former Speaker Carl
Albert stated that Attorney Greneral Mitchell had come to see him
to discuss Albert's aide Suzi Park Thomson; Albert said that Con-

fressman Gallagher and Kim Kwang had not been discussed. The
peEiker stated that he had asked Mitchell if Thomson should be
fired and that Mitchell had responded that he should do so only if
she were handling sensitive material. Albert checked and found
she was not, asked the FBI to run a name check on her, and
learned nothing to cause him concern.

Mitchell testified that the other aide's name had not been raised
because "the matter involving the other Congressman at that par-
ticular time was under investigation." When questioned further,
Mitchell stated:

At the time that [the] investigation was going on concerning those matters, there
was also a criminal investigation going on concerning tax matters. There were
probably other items involved, but I remember tax matters.

The Criminal Division of the Justice Department considered the overall picture
and recommended to me that since they were so far advanced with the criminal

■* At the time of the subcommittee's release of this declassified information (KI-4, appendixes
3F and 3G, pp. 556-557), a statement was erroneously included that Ambassador Habib was
attempting to have Tongsun Park register under FARA. It was true that since the time of his
arrival in Seoul in 1971, Habib had been concerned about Tongsun Park's activities; he had
repeatedly communicated about them to Washington and had encoursiged Ranard's efforts to
have them investigated by Justice under FARA. However, it was not true that Habib's efforts
had been mentionai to the FBI, nor conveyed by them to Kissinger and Mitchell.

141

activities of the Congressman relating to the tax matters that the Korean situation
should be merged into the other matter and that the indictment be brought only
with respect to the tax matters."

Mitchell testified that he had no recollection of ever having seen
the second memorandum from Director Hoover which dealt with,
among other things, the allegations that a named Democratic Con-
gressman had received rice commission payoffs from Tongsun Park
and that the Korean Grovernment had contributed sever^ hundred
thousand dollars to the 1968 Democratic national campaign. Mitch-
ell drew appreciative laughter from the audience at the hearing
when he stated that had he seen such allegations he would remem-
ber them.

Similarly, Mitchell testified that he did not recall the third
memorandum of February 1972 from the FBI, even though a Jus-
tice Department logging slip®** indicated that the memo had his
initials on it. He testified that he had not placed them there. The
third communication again mentioned questionable activities on
the part of one of the same named CJongressmen, and Mitchell
testified once more that he would have recalled the information
had he ever seen it.

Former Secretary of State Kissinger testified before the subcom-
mittee on April 20, 1978, and was also asked about the FBI commu-
nications. As noted earlier, FBI agent McDonnell had requested
permission of the originating agency to disseminate the informa-
tion to Kissinger precisely because he felt that such sensitive infor-
mation would be of obvious interest to the President's Special
Assistant for National Security Affairs. Kissinger did not recall
having received the three communications and indicated that he
would not have been as interested in such information as compared
with information on other international events with which he had
been engaged. He suggested that others in his office, particularly
his deputy, Gren. Alexander Haig, might have received the three
communications. Haig had no recollection either.

Subcommittee staff spoke with several of the persons in Kissin-
ger's office who would have had access to such information. They
stated that top secret "eves only" material from FBI Director
Hoover was hand-delivered by an FBI agent and was opened only
by Kissinger or Haig. The FBI file copies of each document indicat-
ed that each had been hand-delivered to Kissinger's office. The
staff also contacted National Security Council staff involved with
Korean affairs during that time and found that none had ever been
consulted with regard to these matters.'*

••KI-4, pp. 143-144 and 149-150. It should be noted that on Apr. 11, 1972, Congressman
Cornelius Gallagher was indicted for conspiracy, perjury, and income tax evasion; he interrupt-
ed his trial and pleaded guilty to income tax evasion and was sentenced to 2 years and a $10,000
fine on June 16, 1973.

•• KI-4, appendix 5-B, p. 572.

•> The National Security Council (NSC) as a governmental body has virtually no "institutional
memory." While administrative staff in the Special Assistant's office may remain through
successive administrations, policy staff are appomted by each administration. Documents from
other executive branch agencies sire reviewed by policy people and returned to the originating
agencies. Memoranda generated by that review are not kept as permanent files at NSC but
rather are regarded as Presidential papers and are consigned to the National Archives at the
end of each administration. Consequently, no reference material on past actions is readily
available at the NSC. Other problems at the NSC are commented on by former intelligence
official Ray Cline, who addressed what he termed the decline of the NSC: "This same problem
persisted into the Nixon era, when policymaking further narrowed its circle of full participants
and all decisions were made by President Nixon and Henry Kissinger, Nixon's Assistant for

(Continued)

142

Kissinger testified that he recalled "the letter that speaks about
the alleged bribery of one Congressman who was later indicted," "
apparently referring to the July 1971 communication about the
Congressman and his aide cooperating with the KCIA. Because he
knew that the Congressman was being prosecuted, Kissinger be-
lieved the proper actions were being taken:

That communication I recollect, and since that Congressman was later indicted, I
assume that the Justice Department was dealing with the information, and in any
event I must repeat, these were letters from the Director of the FBI to the Attomev
General about matters of jurisdiction entirely within the Attorney General s
domain, and did not involve anything I could deal with."

During an interview with subcommittee staff, former Secretary
of Defense Melvin Laird described his knowledge of Korean lobby-
ing in Washington. He had been aware of lobbjdng of Congress
during the 1960's when he was a Congressman; however, it had
been conducted by the ROK Ambassador to the United States. By
the 1970's, when he was a member of the administration. Laird was
aware that activities had been expanded, that other Korean Gov-
ernment representatives were contacting Members of Congress,
and that the number of congressional delegations visiting Korea
had increased.

Concerning the troop reduction decision which Laird had advo-
cated, he could tell which Congressmen had been contacted by the
Koreans by the nature of their views on the subject. Some Con-
gressman specifically told Laird of the contacts. The Koreans would
overstate the threat from the north to Congressmen, which caused
them to question the troop reduction. Laird said that it was in this
context that he had warned Ambassador-designate Habib about
Korean lobbying just prior to Habib's departure for Seoul.

As Secretary of Defense, Laird had seen reporting on Korean
lobbying activities but had no recollection of specific information
on organized plans of Korean Crovernment officials to influence
U.S. policy. He would not, in anv event, have viewed that activity
as abnormal for a government feeling threatened by a change in
U.S. policy.

In January 1972, only 5 months after Ambassador Habib had
taken up his post in Seoul, Deputy Assistant Secretary Winthrop
Brown prepared a secret memo for the record.** It described
Habib's concern about Tongsun Park's activities. Tongsun Park
was continuing to interfere in the itineraries of visiting congres-
sional delegations and was making campaign contributions to U.S.
politicians. A candidate for Governor of Louisiana was said to have
received at least $50,000, while the amount contributed to various
U.S. election campaigns was said to total $400,000.

Brown added his own comments — that the $1,000 offer to a
named Congressman and others should be reported to the FBI in
connection with their current investigation of Tongsun Park.

(Continued)

National Security Affairs, who came to use the NSC app«u-atus and the intelligence community
as his private staff rather than as supporting staff for the President." (Cline, Ray 8., "Secrets,
Spies, and Scholars: Blueprint of the EeBential CIA," Acropolis Books, Ltd., p. 202.)

" KI-4, p. 242.

•» KI-4. pp. 242-243.

•* "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Conmiittee on International Relations, 95th Cong., 2d sess., part 5,
June 1, 6 and 7, 1978 (hereinafter referred to as "KI-5"), appendix 2-A, pp. 146-147.

143

Brown did not know that the FBI had already concluded the inves-
tigation of Park and that Justice was preparing to close the case.
The subcommittee found no indication that State communicated
this additional concern to the FBI.

Although the FBI had concluded its ROFA investigation by Janu-
ary 1972, Justice did not report the results to State until March
1972 and did not transmit a copy of the FBI report. In his letter to
State, Acting Attorney General Kleindienst said:

Accordingly, in the absence of additional information concerning this subject or
its activities, this Department is contemplating no further action in the instant
matter. Should information subsequently come to our attention sufficient to give
rise to an obligation on the part of this subject to register or indicate that its
activities are in violation of any Federal statute we will, of course, take necessary
action.^*

In the spring of 1972, increased activity on the part of Korean
officials maneuvering for position in Korean-American rice trans-
actions was reported. The KCIA was short of funds.** Lee Hu Rak,
the director of the KCIA, was to supervise personally rice pur-
chases from the United States in 1972 and Tongsun Park was to
continue as front man.

Elected U.S. officials urged President Park to allow Tongsun
Park to handle these matters and used the KCIA pouch from
Washington to Seoul to correspond with the President. Additional-
ly, due to U.S. political pressure, the ROK was purchasing Public
Law 480 rice that it did not need.*^

In late March 1972, U.S. rice suppliers received letters from Ahn
Kwang Suk of the ROK Office of Supply (OSROK):

In order to insure more satisfactory transactions for our rice trade, we are pleased
to inform you that Mr. Tongsun Park, President and Chief Executive Officer of
Miryomg Moolsan Company of Seoul has once again, as in the past, agreed to serve
as an intermediary. In fact, his services will be required for all of our rice trade
with the United States in the future.

We wish to thank you for your past cooperation, and we look forward to having
your support and understanding in the future."

Connell Rice and Sugar Co., one U.S. supplier, asked the Depart-
ment of Agriculture (USD A) if Tongsun Park or any company with
which he was connected was eligible to act as sales agent for Public
Law 480 rice transactions and, additionally, if using him would be
cause for disapproval of financing any commissions.

USDA replied:

In response to your April 17, 1972 telex, please be advised that USDA will not
approve Mr. Tongsun Park or any company with which he is connected to operate
as a sales agent for suppliers of rice to Korea under P.L. 480. Decision predicated
upon section 17.2(cX19) of regulations which states " 'Selling agent' means any
individual or other legal entity who operates as a bona fide sales agent for the
supplier of the commodity and who is not employed by or otherwise connected with
the importer or the importing country." OSROK Seoul and New York have been so
advised.

Mr. Ahn Kwangsuk's March 21 letter to U.S. rice traders is prima facie evidence
that Mr. Park is "otherwise connected with the importer or the importing country"
and therefore has the effect of disqualifying Mr. Park.

"KI-4, Supplement, p. 613.

••Korea in general was experiencing foreign exchange problems at this time. See "Part C-IV:
Economic Relations," pp. 187-191.
•'Ibid., pp. 211-214.
•• KI-4. appendix 4-B, p. 561.

144

Further, the statement in the letter to the effect that "his services will be
required for all of our rice trade with the United States in the future" precludes
Mr. Park from qualifying as a "bona fide" sales agent.**

Subsequently, representatives of the Export Marketing Service of
USDA conveyed their concerns to Tongsun Park and he withdrew
as sales agent.

Despite Park's withdrawal, the Inspector General of USDA was
asked to conduct an investigation to determine if he was connected
with the Korean Government, because:

We are concerned about some aspects of the rice buying practices of the Office of
Supply Republic of Korea (OSROK), under title I, Public Law 480, and the anoma-
lous role played by various Korean purchasing agents and "intermediaries."

Although we can offer little or nothing in the way of tangible evidence with
which to support the purported irregularities, rumors of them have so persisted that
the need to establish the facts is, in our opinion, evident. *•«

USDA investigators once again requested information from the
FBI, CIA, and Secret Service on Tongsun Park. As before, the
results were negative. Also as before, the requests were made by
telephone and for that reason were somewhat perfunctory. *°^

An additional problem faced by the USDA investigators was that
Tongsun Park refused to make his records available and USDA did
not have the authority to compel him to do so. USDA hoped to get
access through IRS, but Tongsun Park was not required to file with
IRS because he was not a U.S. citizen and did not spend more than
6 months of each year in the United States. By January 1974,
USDA closed the investigation, unable to determine the disposition
of Tongsun Park's commissions and whether he was connected to
the Korean Government. *°*

In May 1972, there was corroborating information that Tongsun
Park had been dropped from the rice deals and that he was falling
out of favor with Park Chung Hee; this theme would continue over
the next few years. Instead, KCLA Director Lee Hu Rak was alleg-
edly handling the rice transactions personally.

It was further reported that Lee Hu Rak and the Democratic
Republican Party finance chairman had pressured the president of
Dai Han Nong San (Korean Agricultural Products Co.) to make
that company's Washington bank account available for monetary
transactions. (It was later revealed by the House Committee on
Standards of Official Conduct that this account was used to pay
Tongsun Park rice commissions in an indirect manner which was
not detected by executive branch officials.)

As a further indication of the Korean Government's involvement
in lobbying, in June 1972 the KCLA formed an organization known
as the Overseas Public Information Officers Committee, comprised
of Cabinet officers, whose stated purpose was to coordinate all ROK
public information and propaganda activities abroad.

By October 1972, all the individual repressive measures of the
Park regime had been incorporated and formalized in the new
Yushin constitution which gave Park Chung Hee virtually unlimit-

•• Ethics 2, pp. 491 and 503.
'•o KI-4, appendix 4-A. p. 560.
«•' KI-4. pp. 136-137.
•" KI-4, p. 138.

145

ed powers. In order to control any adverse reaction to the procla-
mation of Yushin, Park imposed martial law.

Ambassador Richard Sneider (who served in Seoul from August
1974 to July 1978) testified before the subcommittee that when the
Korean Government promulgated Yushin and declared martial
law, the U.S. Government did not publicly condemn those actions,
but rather made private representations that it would be in the
best interests of the ROK Government to lessen its control. The
I Korean Government was cautioned about possible adverse reac-
tions by Congress and the U.S. public. The Koreans, however, felt
justified for domestic reasons in imposing the restrictions. Park
Chung Hee's narrow victory in the 1971 election had played no
small role in his decision to implement the Yushin constitution
which eliminated direct election of the president. ^°3

It was reported that Park Chung Hee discussed his concerns
regarding possible adverse American reactions to Yushin with
some of his high-ranking officials and was assured that the
"Korean lobby" in Washington was still effective and that more
Koreans with good U.S. contacts had been sent to monitor the
American reaction. One adviser reported back that there had been
no adverse reaction, and the President began to formulate his
plans for the future.

By early November 1972, the reporting indicated that the Kore-
ans were again stepping up their lobbying activities, with increased
emphasis on public relations. Two Korean officials. Hong Song
Chul and Kim Sang Chin, were to direct a campaign to influence
American journalists and officials to support the Yushin changes.
Three other individuals identified as "longtime ROK lobbyists in
Washington"— Sol Kuk Hwan, Row Chin Hwan, and Kim Won
Kyung— were specifically assigned to influence the State Depart-
ment.

In late 1972, increased efforts by the KCIA to bring more Con-
gressmen to Korea were reported. There, ROK newspapers would
interview them and use quotes to demonstrate U.S. support for
President Park. Statements on the Yushin system were to be
placed in the Congressional Record and then reprinted in the ROK
press as further evidence of American support. The KCIA, which
was to pay for all these activities, instructed Tongsun Park to
arrange visits to Korea by American Congressmen.

Other activities described were a major Korean effort to influ-
ence the U.S. Congress, State Department, press, business, and
academic communities, and Korean residents in the United States.
Again, the stated goals were to achieve favorable reporting in the
American and Korean press for the Yushin program, as well as to
obtain the backing of Korean residents for the Grovernment. De-
tailed instructions were sent to Tongsun Park, the ROK Ambassa-
dor in Washington, and the KCIA station chief in Washington. Dr.
Joungwon Alexander Kim, a researcher at Harvard, was reportedly
recalled to Korea and also given instructions to influence U.S.
professors and get articles indicating support by American scholars
published in American and Korean journals. *°* Hahn Kwang Neun

>•» KI-5, pp. 33-34.

*®*In interviews with subcommittee staff, Kim said that he had gone to Korea at this time
but denied that he had received such instructions. Bank records of Choi Hong Tae and Kim

(Continued)

146

and Kim Chung Hyun, Korean residents in the Washington area,
were also recalled and given instructions to split anti-CiOvernment
residents and collect statements in support of the Park Govern-
ment. The KCIA station chief in Washington was instructed to
infiltrate the Korean residents' association in the Washington area
and cause it to moderate its anti-Government attitudes. Both the
Ambassador and the station chief were ordered to prevent Kim
Dae Jung, the popular opposition leader who had so narrowly lost
to Park Chung Hee in the 1971 Presidential election, from meeting
with U.S. officials, reporters, and members of Korean residents
associations.

This information was considered so significant that it was specifi-
cally addressed to the attention of Dr. Kissinger at the White
House and Dr. Ray S. Cline at the State Department's Bureau of
Intelhgence Euid Research. Neither Kissinger nor Cline remem-
bered the report or any of the events it described.

CONTINUING KOREAN GOVERNMENT INFLUENCE EFFORTS

In a series of letters to Ranard,*°* Ambassador Habib communi-
cated his increasing concern about Tongsun Park's activities, par-
ticularly with respect to rice transactions (Habib was apparently
unaware of USDA's actions) and contacts with certain U.S. Con-
gressmen. In one letter, dated December 18, 1972, the Ambassador
commented on a recent conversation with a U.S. Congressman
visiting Seoul:

Congressman [deletion] said Mr. Park has been intervening in rice purchasing
transactions of the Korean Government by demanding a kick-back of $2.00 a ton
from the shippers in the United States. He asks this fee because he bears impressive
credentials from the Korean Government stating that all rice purchases must pass
through him. He then holds up rice purchases by the Korean Office of Supply until
the rake-off is assured. Mr. [deletion] said he was considering legislation specifically
forbidding such commissions.

Mr. [deletion] said his own relationship with Park began several years ago. He
had been told that Park was an important person who had to be dealt with because
of his influence in regard to U.S.-Korean affairs. In 1971, [deletion] had sent a
telegram to the Embassy protesting Park's intervention in rice purchases. I remind-
ed the Congressman that he had also sent a letter to me in the fall of 1971 on the
same subject. The Embassy had acted on both of those messages and I had made it
clear to the Congressman the last time he was here that he should have nothing to
do with the man whose activities were suspect to say the least.

The Congressman said he had accepted Park's hospitality on numerous occasions
and had permitted him to assist in the arrangements for his visit to Seoul. He
apologized for doing this without my knowledge and said that in the future he
would work through the Embassy.

The Congressman said it was essential that Park terminate his present activities
in United States Government-financed grain purchases. He has asked for a private
session with President Park at which he would raise the subject. •"•

Throughout 1973, the Ambassador continued to express concern
about Tongsun Park's involvement in Public Law 480 rice pur-
chases by Korea. That was curious because: (1) in April of 1972,
USDA had precluded Park from acting as a sales agent; and (2)
from 1972-74, USDA was investigating Tongsun Park to ascertain

(Continued)

Sang Keun. both KCIA officials of the ROK Embassy in Washington, D.C., indicate that in 1973
and 1974 each of them issued a check to Dr. Kim in the amount of $500. Dr. Kim did not recall
receiving any money from a Korean Embassy official. See also "Part C-V: Education, Informa-
tional, and Cultural Activities," p. 310.

»- KI-5, appendixes 2C-2I, pp. 151-165.

'•• KI-5, Appendixes 2-D. pp. 152-154; deletions made by State Department.

147

the disposition of the funds Park had received in previous transac-
tions and whether or not he was connected with the Korean Gov-
ernment. The USDA investigators were apparently unaware that
Park was continuing in 1973 to be involved in such transactions. In
several of his letters, Ambassador Habib indicated his presumption
that the State Department was "making this information available
as appropriate." ^<*^ The subcommittee was unable to find any indi-
cation that State officials communicated their concerns to the ap-
propriate Agriculture Department officials.

By spring 1973, although Tongsun Park was back in President
Park's good graces, his troubles with the U.S. Embassy in Seoul
were increasing. The Ambassador had instructed embassy staff to
have nothing to do with Park. When Park expressed to the politi-
cal counselor his disturbance at this treatment, he was informed
that he would be well-advised to identify himself openly as a lobby-
ist or to dissociate himself from involvement with American public
figures.***®

In the summer of 1973, Tongsun Park called on Ranard at the
State Department. Park wanted to make clear that his George
Town Club had nothing to do with politics, although he mentioned
that certain Cabinet officers were members.

In a letter to Washington dated August 13, 1973, the Ambassador
noted that Tongsun Park had been seen in the company of KCIA
Washington station chief Lee Sang Ho who was then in Seoul
accompanied by another Washington KCIA officer, Choi Hong
Tae.*°* It had earlier been reported that Lee Sang Ho had been sent
to Washington particularly because of his close relationship with
Tongsun Park and his knowledge of Korean Government influence
schemes.

By mid-1973. State Department concern about KCIA harassment
of Korean residents in the United States,**® directed by Lee Sang
Ho, had also escalated, particularly as a result of press coverage of
two events: the resignation and renunciation of Korean citizenship
by Lee Jai Hyon; and the KCIA kidnaping of Kim Dae Jung."* An
internal State Department memorandum dated August 17, 1973 on
the subject of KCIA harassment in the United States said in part:

There are a great many unanswered questions in connection with Kim Dae Jung's
abduction from Japan and reemergence in Seoul * * *. One of the disturbing
accompaniments has been growing fear among Korean residents here over ROK
CIA activities in the United States. The abduction of Kim has heightened these
fears and there is a widely held view that ROK CIA agents here were involved in
Kim's abduction in Japan."'

The memorandum further noted that State had put the ROK
mission in Washington "on notice about activities of its CIA" and
had requested that the FBI investigate those activities. The memo
continued:

We have concluded that while the present ROK CIA chief remains in Washington
he will continue to be the source of contention in the Korean community and
embarrassment to the U.S. Already he has so abused the terms of his assignment
here that we have grounds to request his recall. We have discussed this and other

'«" KI-5, appendix 2-G, p. 158.

"»• KI-5, appendix 2-B, p. 149.

»»• KI-5, appendix 2-G, p. 158, and appendix 3, pp. 172-177.

"°See "Part C-II: Intelligence Activities and Plans," pp. 93-96.

"'See "Part B: Review of Korean-American Relations, ' p. 42.

»" KI-5, appendix 2-K, p. 166.

35-508 O - 78 - 11

148

Dossibilities wdth our own CIA who are also concerned about the implications of
ROK CIA activity in the U.S. They are doing some careful thinking about their own
relations with [KCIA Director] Lee Hu Rak, and expect to be putting up some
thoughts for action directed against him, motivated by concern for internal security
in the ROK.

By the end of 1973, following several representations made to the
Korean Embassy in Washington, the State Department succeeded
in effecting Lee Sang Ho's removal as Washington KCIA station
chief. Following similar representations, tentative plans made by
the KCIA to increase their numbers in the United States were also
temporarily shelved. In Seoul, there was embassy concern over
KCIA Director Lee Hu Rak's actions with regard to both Kim Dae
Jung's kidnaping and the strong measures taken to control campus
unrest, which had included the suspicious death of a teacher. Ap-
parently pursuant to the above memorandum, Park Chong Kyu,
head of the Presidential Protective Force and a close adviser to
President Park, was informed of U.S. distress with some of Director
Lee's actions and was told that such actions were deleterious to
Korean-American relations. By December 1973, Lee Hu Rak had
been charged with corruption, removed from office, and replaced by
the more moderate Shin Jik Soo. Seemingly this was partially duel Tl
to U.S. representations."^ fir

In response to State's request for an investigation of KCIA ha- ii
rassment in the United States, the FBI solicited information from j pe
its field offices in Washington, D.C., San Francisco, and New Yorkjtn
City, interviewed a few persons who had filed complaints about
KCIA harassment and intimidation, and reviewed newspaper arti-
cles."* The FBI checked only with its own field offices, rather than;
consulting local police authorities. Most complaints, for example,
harassing telephone calls, simple assaults, disorderly conduct, and de
malicious mischief, are not offenses which are ordinarily brought
to the attention of the FBI.

One agent ended up talking to Lee Jai Hyon as a result of
interviewing Lee Keun Pal, a complainant. Lee Jai Hyon, who hadjrei
only recently resigned from the Korean Government, had received
wide press coverage because of his position and statements that he
feared retaliation by the KCIA. The FBI agent spoke with Lee Jaijthi
Hyon several times but was apparently unaware of his prominence.] ins
He uncovered none of the information that Lee later provided this
subcommittee in June 1975 — specifically, the nine-point plan by
which the Korean Government, through the KCIA, was to influ-
ence U.S. opinion and harass and intimidate Koreans residing in
the United States."* In interviews with subcommittee staff, Lee
stated that he had spoken with the FBI agent at least three, and
possibly more, times in the fall of 1973, each time attempting to
impress upon the agent, in a general fashion, the importance of the
Korean Government's nine-point plan. The agent did not file a
report describing these conversations.

In February 1974, two FBI agents meeting with Ranard in con-
nection with the investigation of KCIA harassment told him that
no investigation of Korean diplomats could be conducted without

'" After an unsuccessful attempt to obtain a visa to enter the United States, Lee traveled in
Europe and eventually returned to Korea.

"*See appendixes C-72— C-81.

"*See "Part C-II: Intelligence Activities and Plans," pp. 96-97, for more details on Lee Jai
Hyon 8 testunony.

149

express written State Department approval. According to the FBI
memorandum of the conversation,"* Ranard informed them that
State had succeeded in having two KCIA men in Washington re-
called and expressed appreciation for the Bureau's efforts. The FBI
filed reports on the interviews it had had and contemplated no
further action. State apparently did not authorize investigation of
any diplomats. The subcommittee was unable to find any evidence
of further concern by the executive branch about harassment.

By late 1973, the KCIA was facing serious financial and manpow-
er problems in the United States. Increasing official U.S. Govern-
ment recognition of their activities had led to a number of repre-
sentations about the KCIA in the United States and the KCIA
director himself. These factors caused the KCIA to curtail for a
time some actions planned for the United States, including the
assignment of additional personnel.

In December 1973, at the time Lee Hu Rak was removed as
KCIA director, he and several associates were allegedly being in-
vestigated for large-scale corruption. The investigation had prob-
ably been initiated by Park Chong K)ai, a long-time enemy of Lee.
The KCIA under Lee Hu Rak had been manipulating business
firms to raise funds for KCIA management and covert operations;
much of the money raised had allegedly also gone to Lee Hu Rak
personally. Reportedly several businesses were under KCIA con-
trol, one of which has been identified previously as a vehicle for
paying rice commissions to Tongsun Park.

By mid-1974, the new KCIA director. Shin Jik Soo, had shelved
all KCIA connections with businesses. The resulting shortage of
funds caused Shin to institute austerity programs, reportedly or-
dering cutbacks in agents overseas.

One of the elements mentioned in the Blue House meetings held
to coordinate influence schemes had been the Research Institute on
Korean Affairs of General Kang Young Hoon."^ In late 1973, it was
reported that Kang was receiving KCIA funding to support his
institute. By spring 1974, it was reported that the KCIA in Wash-
ington was attempting to persuade wealthy Korean businessmen in
the United States to act as fronts for KCIA funding of Kang's
institute, reported to have reached several tens of thousands of
dollars annually."®

Kim Sang Keun, a former KCIA officer assigned to the ROK
Embassy in Washington from October 1970 to November 1976,
testified before the subcommittee on June 6, 1978. His activities as
a KCIA officer involved dispensing funds to nondiplomatic repre-
sentatives of the Korean Government such as Hancho Kim, Kang
Young Hoon, Hahn Kwang Neun, and Pak Bo Hi. He stated that
he also delivered a substantial sum to Choi Chai Chang. "^ In the
case of Hancho Kim, the money was to finance influence activities
on behalf of the Korean Government. The money for Kang was to
support his institute, Hahn's to support publication of his pro-
Government newspaper. According to Pak Bo Hi, the money he
received was used to reimburse a Unification Church member for

"• See FBI memo dated Feb. 8, 1974, appendix C-78.

'"See also "Part C-V: Educational, Informational, and Cultural Activities," pp. 290-293.
"• Kim Hyung Wook testified (KI-l, p. 45) that initially Kang was given $50,000 by the KCIA,
and thereafter he received $20,000 to $30,000 annually.
"• See "Part C-II: Intelligence Activities and Plans for Eh*. Choi's explanation, p. 99.

150

expenses incurred in Korea in making anti-Communist speeches.
Kim Sang Keun did not know why the money had gone to Pak and
Choi. In all cases the funds came from Yang Doo Won, the real
name of Lee Sang Ho who had been station chief in Washington
until his recall at the end of 1973.

By mid- 1974, in his new position as director of the Office of
Security of the KCIA and using his real name, Yang Doo Won was
again involved in Washington lobbying. In mid-1974 and again in
mid- 197 5, Yang sent four checks from Tongsun Park totaling
$500,000 to KCIA officer Kim Sang Keun. Kim was directed to
disburse those funds, together with other amounts sent him peri-
odically by Yang, to the persons noted above. **°

The KCIA seemed to be resolving some of its manpower problems
by delegating more operational responsibilities to nondiplomatic
persons acting on behalf of the ROK Government. One result was
to reduce the KCIA's visibility without reducing its activities.

Throughout this period the U.S. Embassy in Korea was still
carefully monitoring Tongsun Park's activities in Seoul. In Febru-
ary 1974, the Ambassador wrote two letters to the State Depart-
ment, both describing Park's continuing interference with congres-
sional delegations. Ambassador Habib restated his admonition that
no Embassy personnel were to have anything to do with Park. He
noted that he was also conve)dng these sentiments to visiting Con-
gressmen.^^*

During the spring of 1974, State Department officials received
their first indication that Korea was attempting to expand its
efforts to the White House. While on a trip to Korea, John Ni-
decker, a White House aide, was given an envelope just prior to his
departure by an aide to Park Chong K3ai. Suspicious because of
prior overtures from Row Chin Hwan, a National Assemblyman
previously identified as a ''longtime ROK lobbyist," and also be-
cause of the strict control which his Korean escort had tried to
exercise over his visit, Nidecker turned the unopened envelope over
to an Embassy aide. Back in Washington, he reported the incident
to Greneral Haig and John Froebe at the NSC. He was informed
that the contents of the envelope had been $10,000 in $100 bills."*

State Department documents showed that on May 6, 1974, Am-
bassador Habib returned the $10,000 to Park Chong Kyu with a
letter stating that Nidecker said the envelope had come from Park
Chong Kyu and was to be returned. Subsequently Habib registered
an objection directly to Park Chong Kjoi.

Nidecker testified that Row Chin Hwan visited him again several
times. Once he brought gifts for the President, his family, his
personal staff, and staff of the NSC. All were returned. On other
occasions. Row wrote that he wanted to bring Park Chong Kyu to
the United States and have Nidecker entertain him. Row also
made overtures that Nidecker serve as the conduit for campaign
contributions to Congressmen and Senators. He wanted to provide
$5,000 to House candidates £md up to $30,000 to Senatorial candi-
dates. Ranard prepared a memorandum on June 5, 1974, document-
ing a conversation with Nidecker that day. Row had told Nidecker

*°See "Part C-II: Intelligence Activities and Plans," pp. 98-99.

•' KI-5, appendixes 2H-2I, pp. 160-163.

*• See Nidecker testimony, KI-5, pp. 23-26, for more details.

151

that Korean sources— the inference was the Korean Government-
were prepared to make financial contributions to any congressional
candidates designated by the White House. Nidecker summarily
rejected the offer. Ranard reported it to the Ambassador in Seoul
the same day."^

Around this time, Hancho Kim began engaging in operations for
the Korean Government in Washington, becoming yet another ele-
ment in the influence activities aimed at Members of Congress and
being directed from the top levels of the ROK Government. The
subcommittee inferred that Hancho Kim was being groomed as a
replacement for Tongsun Park because: (1) Park's funds were being
used for the operations of others; "* and (2) former KCIA Director
Kim Hyung Wook testified before the House Committee on Stand-
ards of Official Conduct that he had been told by a former subordi-
nate that Hancho Kim was replacing Tongsun Park whose activi-
ties had become too obvious and frivolous. ^^'^ From State Depart-
ment communications, it was evident that in the years 1973 and
1974 Tongsun Park had indeed aroused a great deal of interest on
the part of some U.S. officials. His activities, because they were
highly visible, had apparently lost their effectiveness.

Although the Washington KCIA station chief was excluded from
knowledge of the Tongsun Park and Hancho Kim operations which
Yang Doo Won was controlling in Seoul,"® he was involved in
contacts with Sun Myung Moon's Unification Church during
1974-75. On August 15, 1974, Mrs. Park Chung Hee was killed by a
Korean resident of Japan. Korean-Japanese relations became
strained as the ROK demanded more cooperation from the Japa-
nese Government in investigating the assassin, whom the Korean
Government claimed was acting on instructions from North Korea.
The KCIA in Seoul sent out directives to its U.S. stations to orga-
nize Korean residents in Los Angeles, San Francisco, and Washing-
ton, D.C., to demonstrate against Japan on the occasion of Japa-
nese Prime Minister Kakuei Tanakas visit to the United States.
The KCIA chief in Washington contacted Moon to provide demon-
strators for the Washington rally. When Ranard learned of the
plans for the demonstrations, he protested strongly to the Embassy.
In light of this representation, the station chief contacted Seoul
and was told to cancel the demonstrations. Moon's demonstrators
were already assembling when the station chief prevailed upon
Han Sang Gil (Moon's public relations counselor and a former
KCIA officer) to call off the rally. The station chief was reportedly
in a quandary as to how to explain to Seoul the expenditure of tens
of thousands of dollars for aborted demonstrations."'

In 1975, the Washington station chief traveled to New York City
to discuss with Moon or his subordinates their lobbying activities
at the United Nations, about which the Korean mission in New
York had received complaints. The subcommittee was not aware of
the substance or results of their discussions. However, in late 1975
it was learned that KCIA Director Shin had instructed the Wash-

>M Various documents supporting Mr. Nidecker's testimony are contained in KI-5, appendixes
lA-lN, pp. 121-145.

"♦ See p. 150.

'*» House Ethics 1, p. 119.

"* See also "Part C-II: Intelligence Activities and Plans," p. 98.

'*'See also "Moon Organization" in "Part C-V: Educational, Informational, and Cultural
Activities," pp. 343-345.

152

ington station chief to cooperate with Moon because he was viewed
as a positive element in promoting better Korean-American rela-
tions. On a visit to Seoul, the station chief was also directed to
concentrate all his resources on lobbying Congress to support ROK
objectives and also to back a particular Congressman's election
compsdgn. There were other indications of increased emphasis on
influencing various segments of U.S. opinion, including the Con-

gess, the executive branch, the press, academic communities, and
orean residents in the United States.

In 1975, according to executive branch reports. President Park's
son-in-law arrived in New York City to take command of all
Korean Grovernment public relations efforts in the United States.
He was given a budget of tens of thousands of dollars per month
for influencing the Congress and constituencies of Members op-
posed to Korean aid, as well as the press and Korean residents.
The KCIA's psychological warfare bureau, newly reorganized, set
up a mission in New York to coordinate its activities with his.
Although technically he should have been subject to the direction
of Korea's ambassadors in Washington and at the New York Con-
sulate, in practice he was given total control of Korean influence
activities in the United States. This factor caused immense friction
with the career diplomats.

Former KCIA Director Kim Hyung Wook testified that Han
Byung Ki, a son-in-law of Park Chung Hee, told him that he was in
charge of all Korean public relations activities in the United
States.^** The subcommittee also established that in September
1975 Ambassador Han Byung Ki encouraged a Korean national
employed by Gulf Oil Co. to obtain a leave of absence from his job
to direct the activities of the American-Korean Cultural Society,
Inc. This organization was under the "jurisdiction" of Ambassador
Han amd was formed to develop and promote American public
interest in Korean culture. However, in reality the organization
was being used by Han to develop positive and sympathetic Ameri-
can opinion for President Park's regime. ^=**

The assignment of President Park's son-in-law to the United
States to handle such a crucial job was an indication of yet another
attempt by the Blue House to coordinate and control the disparate
ROK influence activities in the United States, an attempt which
had begun with the 1970 Blue House meetings. As has been seen,
the attempts were never successful. The various factions and power
groups surrounding the President — the KCIA, the Prime Minister's
group, and the Presidential Protective Force — were constantly
vying for position, the result of tangled motives of patriotism,
personal prestige and profit, and loyalty to the President.

THE JUSTICE DEPARTMENT'S BRIBERY INVESTIGATION

In the fall of 1974, Philip Habib became Assistant Secretary of
State for East Asian and Pacific Affairs, after having served as
Ambassador to the Republic of Korea since 1971. At the time of his
return to the State I>epartment, the ROK Government had been
expressing deep concern to executive branch officials and Members
of Congress and their aides over hearings on human rights in

'» See KI-7.

>*• See appendixes C-82, C-83.

153

South Korea being held by the Subcommittee on International
Organizations and the Subcommittee on Asian and Pacific Af-
fairs. ^=° Shortly thereafter, in December, Congress reduced military
assistance to South Korea by $90 million because of the ROK
Grovemment's human rights record.

In early February 1975, intelligence information came to the
Assistant Secretary's attention concerning KCIA attempts to influ-
ence the opinions of key Americans. He showed it to Secretary of
State Kissinger, who in 1978 told the subcommittee that the infor-
mation—

• * * indicated that there might be some attempt not to lobby but to bribe
Congressmen. * * * I took it to the President. The President asked me whether the
information was conclusive, and I told him it did not seem to be. He asked me to
watch it, and when we had further information, to come back to him."*

In late October 1975, Habib obtained intelligence information of
a more precise nature, which Kissinger then discussed with the
President. Although the intelligence community was reluctant to
have the information turned over to investigative agencies, the
President ordered that it be made available to them. Pursuant to
his orders. Assistant Secretary Habib, accompanied by State De-
partment Legal Adviser Monroe Leigh, delivered the information
to Acting Attorney General Robert Bork in mid-November.

At the Department of Justice, the Foreign Agents Registration
Section was continuing its efforts to determine whether Tongsun
Park should be required to register as an agent of the Korean
Government. Justice's investigation of Korean bribery and payoffs
became full-scale in mid-1976 when the newly created Public Integ-
rity Section took over the investigative files developed by the Regis-
tration Section and the intelligence information transmitted by the
State Department. As of October 1978, the investigation had result-
ed in five indictments and two convictions. "=* Tongsun Park was
indicted on September 6, 1977, and later was granted immunity
from prosecution in return for cooperation with the investigation.
Another Korean agent of influence, Hancho Kim, was indicted on
September 27, 1977, and convicted on April 8, 1978. Former Con-
gressman Richard Hanna was indicted on September 6, 1977. After
entering a partial plea of guilty, he was sentenced to 6-30 months
in prison on April 25, 1978. Former Congressman Otto Passman
was indicted on February 6, 1978, and Grover Connell, a rice
dealer, was indicted on May 25, 1978. Passman and Connell were
still awaiting trial in October 1978.

CONCLUSION

By the end of 1971, agencies of the executive branch had suffi-
cient information to warrant taking steps to alter certain question-
able conduct by Korean Government officials and agents. The State

''""Human Rights in South Korea: Implications for U.S. Policy," hearings before the Subcom-
mittees on Asian and Pacific Affairs and on International Organizations and Movements of the
Committee on Foreign Affairs, 93d Cong., 2d sess., July 30, Aug. 5, and Dec. 20, 1974.
>" KI-4, p. 247. ^ ^

'"Crimes charged variously in the indictments were bribery, conspiracy, violation of the
Foreign Agents Itegistration Act, accepting illegal gratuities, mail fraud, political contributions
by a foreign agent, making false declarations to a grand jury, income tax evasion, and racketeer-
influences and corrupt organizations.

154

Department and the U.S. Embassy in Seoul regarded Tongsun
Park as an unregistered Government agent, a nuisance counterpro-
ductive to normal government-to-government relations who was
offering gifts of cash to Congressmen. Both the Department and
the Embassy presumed he was connected with the KCIA. State
believed that Radio of Free Asia was controlled by the KCIA and
that it was using financial contributions from Americans for un-
known purposes, since broadcast facilities apparently were pro-
vided free of charge by the Korean Government. Because Radio of
Free Asia's sponsors included prominent Americans, the Depart-
ment was worried about the possibility of a scandsd. State had
some indication that Kim Kwang, an aide to Congressman Neil
Gallagher, was a KCIA agent reporting on the activities of Gal-
lagher's subcommittee. Officials at State also suspected that Suzi
Park Thomson, an aide to Speaker Carl Albert, was working for
the KCIA.

The FBI had information that convinced its own officials that
"criminal activities are strongly indicated," *" that a KCIA agent
working as a Congressman's aide had made a "payoff' to the
Congressman; that Tongsun Park had made payments to a Con-
gressman from money received in rice deals; that a Congressman
had sought campaign contributions from President Park and had
recommended that Tongsun Park not only be put in charge of all
lobbying and influence efforts in the United States, but also should
be named chief ROK agent for rice purchases from the United
States.

No effective action was taken to deal with any of these reported
activities. When the State Department asked the Department of
Justice to investigate Radio of Free Asia, Tongsun Park, and other
Korean matters. Justice and the FBI did no more than interview
the head of Radio of Free Asia and run a file check before closing
the case. According to Ambassador Porter, the problems caused by
Tongsun Park had reached "serious dimensions," "* and he com-
plained to ROK Government leaders. However, as Tongsun Park's
activities continued undeterred, the problem was not given atten-
tion at the top level of the State Department. Officials at State
were under the impression that the FBI was investigating Kim
Kwang in 1971 when in fact the FBI was not.

With respect to the FBI's information indicating criminal activi-
ty. Director J. Edgar Hoover favored instituting a national security
intercept in the matter of the alleged bribery of a Congressman by
a KCIA agent. The subcommittee found no evidence of the idea
being pursued further. Hoover sent the information indicating
criminal activity to Attorney General Mitchell and National Secu-
rity Adviser Kissinger, but with a statement that the "information
is extremely sensitive gind such as to preclude any investigation
whatsoever." ^'^ Accordingly, neither Mitchell nor Kissinger took
action, other than Mitchell's informing Speaker Albert about the
report on Albert's aide. According to Albert, the Attorney General
and he agreed that there was no cause to dismiss the aide, Suzi

'" KI-4. appendix 3-H, p. 558.

•»* KI-4, p. 69.

'" KI-4, appendix 3-G, p. 557.

155

Park Thomson, because she did not have access to classified mate-
rial.

The failure to share information among executive branch agen-
cies accounts partly for the failure to take effective action regard-
ing questionable Korean activities. When the Department of Agri-
culture queried the appropriate agencies to determine if Tongsun
Park was connected with the ROK Government at a time when he
was to become a selling agent for rice deals under the Food for
Peace program, the reply was in the negative. This was despite the
fact that the agencies had information strongly indicating that
Tongsun Park was working with the KCIA. When the State De-
partment asked Justice to investigate Radio of Free Asia, Tongsun
Park, and other matters in 1971, Justice applied the "third agency"
rule and failed to provide the FBI with State's information that
Tongsun Park had offered money to Congressmen. Justice, for its
own part, did nothing with that information. Donald Ranard, the
State Department's Director of Korean Affairs, was cut off from
information about KCIA operative Kim Kwang, whose work with
Congressman Gallagher's subcommittee could have had a direct
bearing on matters of concern to Ranard's office.

Priorities established at the highest level of the U.S. Government
resulted in insufficient attention to lower-priority matters by
senior officials. Subordinates, responding to the priority concerns of
their superiors, usually paid scant attention to periodic intelligence
reports about Korean influence plans and activities. Since officials
at all levels were busy with other matters, a cumulative record was
not maintained. A record would have shown a pattern of growing
and interrelated activities. Donald Ranard did compile a list of
some of the suspicious activities in connection with State's request
for an investigation in 1971, but Justice failed to take advantage of
the information.

Forceful measures against ROK influence activities would have
run counter to the primary concern of U.S. policy toward South
Korea in the early 1970's: participation by Korean forces in the
Vietnam war. In addition, there were related priority concerns: to
accomplish the reduction of U.S. troops in Korea with minimum
adverse consequences to Korean-American relations; and to main-
tain credibility for the U.S. position in Korea as a firm commit-
ment to resist the threat of Communist aggression. Preoccupation
with these concerns led to a permissive attitude toward question-
able Korean activities in the United States.

Ambassador Porter recalled how the situation appeared to him
from Seoul:

I sensed a good deal of permissiveness * * * I think there was at least one case
referred to Justice ♦ * ♦ and nothing ever seemed to happen. The Congress was
certainly aware of its contacts, or a lot of contacts with people like Tongsun Park *
* * I assumed * * * the lack of reaction from Washington where it was all
happening right here in our front yard * * * was due to a lack of desire to make
things difficult for an ally who was contributing so much to the Vietnam effort. *"*

The State Department, a policy agency with the least amount of
information indicating criminal activity, consistently took the most
initiative for action against Korean influence activities. The Justice
Department, a law enforcement agency with the most information

»>• KI-4, p. 60.

156

indicating criminal activity, took the least initiative. Prior to 1975,
the only decisive action taken was that of the State Department
when it requested the recall of KCIA station chief Yang Doo Won
in 1973 for harassment of Koreans in the United States. A request
by State to Justice for an investigation brought only perfunctory
action. After Yang departed the United States, harassment as well
as other improper KCIA activities continued. In 1975, the chairman
of the Subcommitttee on International Organizations asked Justice
to investigate a former Korean diplomat's allegation of a nine-pwint
KCIA plan to buy support in the United States. The Justice De-
partment took no active interest in the matter, so the subcommit-
tee began an inquiry which led to the Investigation of Korean-
American Relations.

It was only when concern was elevated to the level of the Presi-
dent and the Secretary of State that Justice undertook a full-scale
investigation. Again, the initiative came from the State Depart-
ment, specifically from Philip Habib, Assistant Secretary for East
Asian and Pacific Affairs. As Ambassador to Korea from 1971 to
1974, Habib had become increasingly suspicious about the way
Korean officials were attempting to influence Americans. His an-
noyance over Tongsun Park's activities led to an order that Embas-
sy personnel have nothing to do with Park. Park Chong Kyu's gift
of $10,000 to a White House aide was returned and followed with a
strong remonstrance from Habib. After he returned to the United
States amid heightened Korean influence activities in Congress
over a reduction in military assistance and criticism of human
rights violation, Habib requested intelligence information. What he
received in February 1975 was of a more specific nature than
anything he had seen previously, strongly implying attempts to
bribe Congressmen. He immediately took the information to Secre-
tary of State Kissinger. In 1971, Kissinger had known of an alleged
bribery of a Congressman by the KCIA, but this was the first
intelligence he had seen alleging bribery of more than one. Kissin-
ger brought the matter to President Ford's attention. Since the
information was not conclusive, the President asked for further
information. In October, when Habib received intelligence which
was much more definite, the President ordered that it be turned
over to the Attorney General.

E>ven after the Korean bribery investigation was well underway,
there was continuing reluctance by the Department of Justice to
look into questions of improper activities involving the Korean
Government. In 1976, Under Secretary of State Habib requested an
investigation by Justice to determine whether Rev. Sun Myung
^oon, Pak Bo Hi, and several of the organizations associated with
Moon, should be required to register under the Foreign Agents
Registration Act. Justice refused to investigate, citing the absence
of prima facie evidence that the Unification Church is not a bona
fide religious organization. The refusal noted also that the 1971
investigation of Radio of Free Asia, requested by State, had con-
cluded with insufficient evidence to establish that Radio of Free
Asia was an agent of a foreign principal.

The decision of Justice not to investigate Moon's activities in
1976 was based partly on the results of a pro forma investigation in
1971 when decisions were made not to investigate strong indica-

157

tions of criminal activity by persons involved in the Korean Gov-
ernment's influence campaign. A serious pursuit of those indica-
tions could have forestalled the scandal 5 years later. It is signifi-
cant that in 1975 Assistant Secretary Habib — unaware of the earli-
er information — acted on information alleging criminal activity
which was not more serious than that which was known by the
Justice Department in 1971.

RECOMMENDATIONS

In addition to monitoring the activities in the United States of
the intelligence services of unfriendly countries, appropriate agen-
cies should monitor more closely the activities of other intelligence
services which may present special problems for the United States.
Current lists of all foreign intelligence officials assigned to the
United States should be maintained. The Justice Department
should take steps necessary for the effective enforcement of the
Foreign Agents Registration Act, as well as other related statutes
such as 50 U.S.C. 851-857. The State Department should be pre-
pared to act firmly whenever activities by foreign intelligence ser-
vices appear to violate U.S. laws.

To assist the Director of Central Intelligence in transmitting
classified information to the Justice Department, there should be
created within the Justice Department a mechanism for the rou-
tine receipt and appropriate handling of such information.

The Department of Justice and the Federal Bureau of Investiga-
tion should be treated as one agency for purposes of the "third
agency rule," which prevents a third agency from receiving from a
second agency classified information originally obtained from an-
other agency.

If during the normal course of operations the Director of Central
Intelligence becomes aware that Members of Congress or members
of congressional staffs have been contacted or designated for con-
tact by persons known to be or suspected of being foreign intelli-
gence officers or unregistered foreign agents, such information
should be made available to the leadership and the Select Commit-
tee on Intelligence of the appropriate House of Congress.

Written statements or articles provided to Members of Congress
by foreign governments, agents of foreign governments, or by
Americans acting on their behalf, should be identified as such
when placed in the Congressional Record or in the records of
congressional hearings.

The State Department should enter into negotiations with the
Republic of Korea for a formal extradition treaty with this country.

158
IV. Economic Relations

INTRODUCTION

The subcommittee's authorization to investigate Korean-Ameri-
can economic relations resulted in part from specific allegations
relating to payments made by U.S. businesses to ROK Government
officials and the questionable uses to which they were put. There
were also allegations of irregularities in the administration of the
U.S. Public Law 480 program.

However, Korean-American economic relations had significance
beyond allegations of wrongdoing. Since 1961, Korea evolved from
an extremely poor country almost entirely dependent on U.S. eco-
nomic assistance to a developed trading nation whose actions now
affect the economies of many other nations, including the United
States. The subcommittee therefore looked at the U.S. role in that
development: How the United States helped to shape the Korean
economy through advice and over $4 billion in grants and loans,
made available since the Korean war.

A study of the U.S. role necessitated an investigation of the
following executive branch agencies which provided assistance: The
Agency for International Development (AID), a branch of the State
Department; the U.S. Department of Agriculture (USDA); and the
Department of Defense, whose military programs had a major
impact on the Korean economy. To put the study in perspective,
the subcommittee looked at the U.S. role in relation to Korean
economic programs and the activities of other nations and multilat-
eral lending institutions.

The primary role in U.S. economic assistance was played by AID,
which provided grants, loans, technical assistance, and advice. AID
worked within the long-term U.S. strategy of having Korea support
the cost of its own defense. AID's principal function was to admin-
ister a set of programs designed to develop Korea to the point of
self-sufficiency. It was always recognized that the mark of AID's
success would be its ability to "get out of the aid business" in
Korea. AID also pursued a subsidiary goal of equitable develop-
ment for all social sectors in order to insure economic stability in
the long run.

Ultimately, AID was able to wind down its assistance programs.
In the early 1960's, AID assistance had been essential to the contin-
ued functioning of the economy, but by the 1970's the agency's role
was primarily advisory. Even by the mid-1960's the economy had
been strengthened to the point where Korea required relatively
little grant assistance and could support the expense of loan pro-
grams from the United States and other international commercial
and government sources.

The subcommittee found, however, that while AID had been able
to promote industrial economic development efficiently, it provided
fewer funds for improving the social infrastructure. In addition,
throughout the 1960's and 1970's, AID's leverage, which was based
on the potential for withholding assistance, was used primarily to
encourage fiscal and monetary reforms rather than social or politi-
cal changes.

159

The subcommittee also concluded that in the late 1960's and in
the 1970's, the Public Law 480 program was not as rationally or
objectively implemented as were other programs for economic de-
velopment. The levels of Public Law 480 assistance were subject to
a variety of influences: The Nixon administration's wish that
Korea restrain its textile exports, the Defense Department's inter-
est in providing support for the Korean military budget, and the
desire of certain Congressmen to sell, and of Korean Government
officials to buy, large quantities of rice. Due to these factors, the
Public Law 480 program could not be used to support AID's goal of
reducing assistance and making Korea self-sufficient. Korea re-
ceived more Public Law 480 assistance than was necessary, which
some analysts believe might have retarded its agricultural develop-
ment.

The U.S. military's policy of building the Korean defense capabil-
ity also affected U.S. economic assistance. The Korean Grovern-
ment, with U.S. approval, was able to use the proceeds from the
sale of U.S. assistance commodities in Korea to support its military
budget. From the end of the Korean war through the early 1960's,
it was understood that U.S. economic assistance would provide two-
thirds of the ROK defense budget. In the mid- to late-1960's, as the
Korean economy expanded rapidly, this ratio could no longer be
maintained. The reduction and changes in the nature of economic
assistance were not easily accepted by the Korean Government or
the U.S. military, both of whom had a strong interest in U.S.
economic assistance, and led to certain distortions in the economic
assistance program in the 1970's.

Expenditures by the U.S. forces in Korea and the military com-
pensation and assistance programs administered by the Depart-
ment of Defense have amounted to about $7 billion from 1960
through 1977.^ The subcommittee studied the effects of U.S. mili-
tary grant and credit assistance, expenditures by U.S. forces, and
U.S. compensation for Korean troops in Vietnam. In the 1960's,
these programs were substantial factors in Korea's economic
growth. By the 1970's, however, Korea reluctantly but successfully
accepted a greater share of its defense burden.

Finally, as the Korean economy developed, the United States
played a greater role as trading partner, and U.S. private trade
and investment had a major impact on the economy. The subcom-
mittee studied this role and investigated the use to which both
countries put U.S. trade and investment equity in Korea.

THE KOREAN ECONOMY: 1945-61

Thirty-five years of colonial rule and the division of the peninsu-
la after World War II left South Korea with an extremely weak
economy. Most of the natural resources, hydroelectric power, and
industry were in the northern half of the peninsula and thus were
lost to South Korea. The south was also left with only 10 percent of
the industrial assets and an agricultural economy limited in size
and potential, yet it had to provide for three-fifth's of the peninsu-

»This figure includes the $1.5 billion in grants and loans under the 1971 modernization
program, an average of about $200 million per year under the MAP program from 1960 to 1971,
about $1 billion in Vietnam-related earnings, and an average of about $180 million per year
from U.S. forces' expenditures.

160

la's population. Further, the fertilizer production capability was in
the north. Under these conditions and in the absence of any rela-
tionship with Japan, Korea became dependent on the United
States for its survival and economic recovery. Between 1945 and
1948, the U.S. Army military government, which administered
South Korea, provided more than $500 million in assistance, 90
p)ercent of which was in the form of relief— clothing, fuel, fertilizer,
and food— with only 10 percent for economic development.

The Korean war reversed what little economic progress had been
made since the end of World War II. It also had a major impact on
the nature of U.S. assistance to Korea. In addition to the massive
aid required for recovery, the U.S. contribution for defense sky-
rocketed. The 100,000-man Korean constabulary force was expand-
ed into a 600,000-man army, making U.S. assistance even more
crucial.

Following the war, President Eisenhower sent a mission to study
the future U.S. role in Korean economic recovery. It recommended
a major bilateral assistance program. As a result, between 1953
and 1962, U.S. assistance to Korea averaged more than $200 mil-
lion per year, with a peak of $368.8 million in 1957. Postwar
assistance was directed primarily toward relief, with the objective
of rebuilding the infrastructure of the Korean economy and devel-
oping a sound economic system which would permit the United
States to reduce aid in the future.

President Syngman Rhee, who took office in 1948, was convinced
that the first step toward economic self-sufficiency had to be reuni-
fication of the peninsula. Consequently, the Koreans gave little
consideration to the economic development of South Korea as such,
beyond basic reconstruction of dsimage from the Korean war.
Rhee's primary interest was in getting the most U.S. assistance
possible, and he was not above exaggerating Korea's poverty to do
so. Widespread economic corruption under his administration
eroded the effectiveness of U.S. assistance, and Korea became
known as the "rat hole of AID": dollars poured in with few visible
results. Growing dissatisfaction with the slow pace of economic
progress was a factor in the student demonstrations and the over-
throw of Rhee in 1960.

At the time of the military coup in 1961, the legacy of Rhee's
ineffective policies — a legacy which the short-lived Chang Myon
administration had been unable to overcome — was an extremely
poor and weak economy. Earnings from exports of goods in 1960
were about $33 million, which meant that funds for investment
were scarce. Per capita GNP was only $90.' With tax collection
inefficient. Government revenues and investments were therefore
minimal. Maintaining the large defense establishment was a con-
stant drain on resources. Double-digit inflation and low interest
rates at savings institutions provided little incentive to save, and
the banking system was weak.

In addition to these problems, the Rhee Government had al-
lowed, and often fostered, inordinate use of credit, with little
regard to investment priorities and the creditworthiness of borrow-
ers. The economy had been subject to a wide variety of Govern-

» Brown, Gilbert T., Korean Pricing Policies and Economic Development in the 1960'8 (Balti-
more: Johns Hopkins University Press, 1973), pp. 296-297.

161

ment controls which limited the development of free market forces
and contributed to instability in portions of the industrial sector.
Several large, Government-owned enterprises suffered from poor
management and uneconomical rate structures. In the foreign
sector, there was a large balance of pa3mients gap, supportable only
because of U.S. aid. Capping all this was the persistent lack of
confidence of the Koreans in their economic future, which discour-
aged long-term investments.^

At the same time, there were some positive economic factors.
Land reform in the 1950's had left the rural sector politically
stable, although poor. Industrial capacity had developed during the
1950's and, although directed toward an inefficient strategy of
import substitution, could be converted to more efficient use.
Korean business and government managers had gained in experi-
ence, especially after the end of Japanese rule. Most important, the
Korean people themselves, hardworking, educated, and disciplined,
represented a great but untapped resource. For the most part,
however, these positive elements were latent and were overshad-
owed by Korea's economic difficulties.

KOREAN-AMERICAN ECONOMIC RELATIONS: 1961-63

When Park Chung Hee came to power in 1961, economic policies
were changed. Rather than focusing on reunification as a prerequi-
site for economic success. Park was to adopt a long-range strategy
of developing an independent economy. He looked on economic
progress as the cornerstone of his political legitimacy and the key
to public support. Economic growth would enable his Government
to fulfill another goal: To move away from dependency on the
United States and toward a self-sufficient national economy.

The Park Government issued the First Five- Year Plan (FFYP) in
January 1962; it was built on a plan of the Chang Myon Govern-
ment that had never been implemented. The goals were poorly
defined and overly ambitious, but the plan did establish some
national objectives and led the Government to take a number of
positive actions. For example, through a very high rate of mone-
tary expansion, the FFYP called for increased capital formation
and decreased dependence on foreign assistance.*

The plan was never carefully followed: droughts, high inflation,
financial scandals, and the need to consolidate political power in-
tervened. Nonetheless, the period of military rule saw some defi-
nite improvements in economic conditions, especially by 1963. Park
brought many professionals into the economic planning process.
Projections of the FFYP were revised downward to realistic levels,
and the Government showed greater concern with financial stabil-
ity after the bout of high inflation which resulted from the mone-
tary expansion of 1961 and 1962. With the concurrence of AID,
Park concluded that an import substitution strategy was not in
Korea's long-term interests. Economic success could be better
achieved by pursuing an export-led economy based on labor-inten-
sive industries which would use the substantial numbers of unem-

' AID Korea, FY 1967. country assistance program, Part I, September 1965, p. CASS-2.
♦Adelman, Irma, Practical Approaches to Development Planning: Korea's Second Five- Year
Plan, (Baltimore: Johns Hopkins Press, 1969), p. 4.

162

ployed and underemployed workers.* This strategy, along with the
implementation of some AID-inspired reforms, led to a more than
doubling of export earnings— to about $80 million— and a 17.7 per-
cent increase in domestic revenues in the period 1961 to 1963.*

U.S. assistance in the 1960's

Before proceeding with a discussion of Korean-American econom-
ic relations in the 1960's, it is useful to look at the nature of U.S.
economic assistance programs at that time.

1. Security supporting assistance (commonly called supporting as-
sistance).—This program provided assistance in the form of grants,
to be used to import U.S. commodities needed for the developing
industries. The Korean Government sold the commodities on the
domestic market and used the won generated to support its armed
forces. Proceeds from the sales of these and Public Law 480 com-
modities (see below) supported 96 percent of the military budget in
1960.

This program was reduced from $176 million in 1961 to $20
million in 1969 and was ended in 1971.

2. Development loans.— TYvese loans were used mainly for infra-
structure and power and transportation facilities, but also for in-
dustries and small and medium businesses. Loan applications from
the Korean Government were analyzed by AID for feasibility and
to determine the potential for national economic benefit (this proc-
ess provided AID with means of influencing the kind of develop-
ment Korea pursued). The loans were long-term (40 years) and low-
interest (a maximum of 2.5 percent). They were generally made to
the Government, which in turn often reloaned the funds. AID
retained the right to approve how the ultimate borrower used the
funds and could impose certain requirements. As grant supporting
assistance declined, development loans were increased, although
they, too, decreased in the late 1960's. Both the grant and loan
programs benefited U.S. commodity suppliers, since assistance was

ti^" to Korean purchase of U.S. commodities.

3. Technical assistance. — This was a small program relative to
overall assistance funding, but was important in establishing
Korean economic independence in the long term. It was designed to
provide technical advice on a variety of projects ranging from
training of economists and the staff of industrial, agricultural, and
scientific organizations to vocational and higher education projects
and export promotion. It averaged about $8 million per year.

J^. Public Law 4S0. — Food for Peace was a USDA program author-
ized in 1954 and administered in Korea by AID, although AID did
not have control over setting program levels.^ It consisted of four
titles, two of which, discussed below, provided significant funds to
Korea.

Under title I, the U.S. Government would buy U.S. agricultural
commodities and sell them on a long-term, easy-credit basis to the
Korean Government. The Government then sold the commodities
on the domestic market for local currency. Until 1966, payment to
the United States could be in local currency, which helped Korea

» Draft of NSC Task Force Report on Korea. June 12. 1961; see appendix C-4.

•Op. cit., Brown, pp. 134 and 54.

'See pp. 207-215 of this section for more detail on Public Law 480.

163

maintain its scarce foreign exchange reserves. Amendments to
Public Law 480 in 1966 called for a transition to dollar sales by
December 31, 1971.

The local currency generated by sales was used in one of three
ways:

(1) For country use: For Korea's use, largely for military budget
support.

(2) For United States use: For U.S. Government needs in local
currency.

(3) For Cooley loans: Funds for U.S. businesses in Korea.
Throughout the 1960's, most local currency was used to support

the military budget.* However, in 1966 Congress legislated that the
"country-use" funds could not be used for this purpose after 1971.
While direct use for military budget support did end at that time,
indirect use did not.*

Title II provided for donations used in the 1960's primarily for
economic self-help programs in the general area of rural develop-
ment. The largest use was for employment of civilians on rural
"Food for Work" projects such as bench-terracing and land recla-
mation. Title II was "to serve as the U.S. Government's major
people to people program" and to give U.S. assistance higher public
visibility than did development loans and supporting assistance. ^°

Because Public Law 480 proceeds were used for military budget
support, the levels were of interest to the U.S. military. One AID
Administrator felt Public Law 480 was never fully separated from
military budget support and the development goal was never clear-
ly established."

Actual levels of assistance, by program, are shown in the follow-
ing table:

FUNDS PROVIDED UNDER ALL ECONOMIC ASSISTANCE PROGRAMS— 1961 TO 1969

[In millions of dollars]

1961 1962 1963 1964 1965 1966 1967 1968 1969

Supporting assistance 176 93 92 75 71 60 45 30 20

Development loans (authorized) 3 23 28 29 49 80 61 30 20

Public Law 480, titles I and II 44 59 90 81 73 55 73 75 186

Technical assistance II 11 533596 5

Totals 261 207 230 208 191 252 178 180 220

Sources: "AID Program Memorandum 1970" and "AID Country Field Submission, 1971;" U.S. Food for Peace Office and USDA.

The changes in levels of assistance by program and in relation to
one another can be seen from the following chart derived from the
above table.

' U.S. Embassy, Seoul message October 1968: "The local currency sales portion of the proposed
Public Law 480 program will generate won primarily for use together with SA (supporting
assistance) generated won in support of ROK military budget. The proposed size of SA grant
program takes into account amounts of local currency to be generated by Public Law 480."

^See "Military Assistance in the 1970's" in this section, pp. 203-205.

••AID, fiscal year 1969 prc^am memorandum, July 1967, annex F.

" AID, Korea, fiscal year 1970 program memorandum, July 1968; AID, Korea, fiscal year 1971
country field submission, August 1969.

35-508 O - 78 - 12

164
Aid Program' Funds— 1961-69

[Millions of dollars]

175 .

(Supporting assistance

150

125.

\ ■

100

titles /

75
50

/
/

/
f

y P.L. A80,

<^ I & II

^---^

y^ Development

loans

'61 '62 '63 '64 '65 '66 '67 '68 '69

•Technical assistance, at a level of $11 million per year or less, does not appear on the chart.

The Korean economy was also indirectly supported by several of
the Defense Department's programs (discussed in detail below). For
example, the military assistance program (MAP) provided grant
assistance that Korea used to obtain U.S.-approved military equip-
ment. This relieved South Korea from having to spend scarce for-
eign exchange reserves for military supplies and alleviated the
economic burden of defense. Throughout the 1960's, U.S. grant
military assistance, including grants of surplus equipment, aver-
aged about $200 million per year. In 1965, the value of U.S.-granted
equipment was twice as much as similar Korean Grovernment de-
fense-related expenditures."

AID goals: 1961-63

Korea was, as noted, highly dependent on U.S. grant assistance
at the beginning of the 1960's. As one AID official put it, "the
United States was the only game in town." Grant assistance as a
percentage of total imports was 83.6 percent in I960." Most was
used to support the basic functioning of the economy, with little
spent for long-term investments.

"Cole, David C . and Princeton N. Lyman, Korean Development: The Interplay of Politics and
Economics (Cambridge: Harvard University Press. 1971), p. 175.
'» Bank of Korea, Economic Statistics Yearbook, 1976.

165

After the Korean war, the idea behind U.S. aid had been primar-
ily to sustain the Korean economy at a level where the country's
defense capabilities could be maintained. With this goal in mind,
the AID mission amd the Korean Economic Planning Board (EPB)
figured the bottom line for maintaining the economy and then set
a level of economic assistance.^* Perforce, that level centered to a
large extent on the requirements of the Korean defense budget. It
was agreed that the United States would provide two-thirds of the
Korean defense budget through economic assistance.

When Park Chung Hee came to power in 1961, a U.S. presiden-
tial task force reviewed the Korean economic and political situa-
tion and established a series of recommendations and immediate
and long-term goals. The White House agreed that the United
States would be "prepared to deal on a friendly and cooperative
basis with the new regime" and provide the "$28 million in re-
maining defense support funds [supporting assistance]" plus
"higher levels of assistance to support a National Defense Plan,"
but only if the "Korean Government enters into and carries out
firm and specific commitments for reform." The reforms included
fiscal and monetary actions, restructuring the rate systems of the
power and transportation industries, and commencing production
in already existing factories."

Development assistance, as opposed to the above supporting as-
sistance, would be provided in the future if the Koreans achieved
long-range social planning, return to civilian rule, constitutional
freedoms for individuals, and anticorruption programs, among
other goals. ^®

Thus supporting assistance was to be available immediately, as-
suming certain economic reforms were undertaken. While social
and political reforms were called for, the development assistance
tied to those reforms was a promise for the future. From the
inception of AID in 1961, a tension existed between two major goals
of the agency's economic aissistance programs. On one hand, AID's
primary goal was to assist the very rapid development of an export-
led economy which would then be able to support a large military
budget. On the other hand, AID wanted to assure that the growth
would proceed in a socially equitable way and in a democratic
political environment.

AID/ROK relations: 1961-63

Although certain economic reforms were undertaken and some
progress made in these years, there were differences of approach
and attitude between American and Korean planners. James
Killen, the first AID mission director in Seoul (1961-64) perceived
his role as that of a bargainer representing U.S. interests in opposi-
tion to Korea's. In those years, AID opposed the Korean Govern-
ment's policies of expanding the money supply and felt the Govern-
ment relied too heavily on U.S. assistance and not enough on its
own resources. On the Korean side, the pattern of psychological
and economic dependence was ingrained, as was the lack of confi-
dence in Korea's economic future without U.S. assistance. Further,

'♦ The EPB is the central economic planning organization of the Korean Government.
» Op cit., Draft of NSC Task Force Report, June 12, 1961; see appendix C-4.
'• Ibid.

166

Korean planners worried that any increase in national income , ^
would generate an equivalent decrease in U.S. assistance. Their ' '
concern was particularly great because U.S. economic assistance
maintained Korean forces. As a result of these fears and AID's .
attitude, the relationship was one of constant bartering, with '
Killen using assistance as leverage for changes the United States
favored and his Korean counterparts pushing to extract the maxi-
mum possible assistance.

Despite the confrontational nature of Korean-American economic
relations during the early post-coup period, the United States was
able to get the Korean Government to initiate some economic
reforms which proved successful in fostering Korea's future eco-
nomic development. For example, in 1963, Killen refused to release
supporting assistance for 9 months until the Government effected
tax reforms to reduce the size of its budget deficit. ^^ As a result, tax
collection was greatly increased.

KOREAN-AMERICAN ECONOMIC RELATIONS: 1964-69

By 1964, the emphasis of both the Republic of Korea Government
and AID was on building the basic structures of the economy (light,
labor-intensive industries, transportation systems, and power facili-
ties) and on exports. While encouraging agricultural growth to an
extent, AID channeled most of its funds into infrastructure and
export development.

In 1964, Joel Bernstein replaced Killen as the U.S. AID mission
director in Seoul. He finalized changes in AID program policies and
encouraged a spirit of cooperation that altered the nature of
Korean-American economic relations. These actions had a major
impact on Korea's economic development in the rest of the 1960's.

In testimony before the subcommittee. Dr. Bernstein explained
that at the time he became Director, the overriding American
objectives for improving the Korean economy were incorporated
into what became known as the stabilization program. The key
ones were: (1) Increased savings through tax collection, interest
rate reform, and greater availability of investment funds; (2) great-
er Korean self-confidence; (3) more growth in exports, in part
through the elimination of quantitative import controls and li-
censes; and (4) reform of the monetary and fiscal structure, espe-
cially by tightening the money supply and floating the exchange
rate. In addition, the United States wanted Korea to provide small
businessmen and farmers better access to credit and technical as-
sistance.^*

From the outset. Dr. Bernstein adopted a very different approach
in negotiating assistance and as a result strongly influenced
Korean attitudes. He recognized that the previous adversarial rela-
tionship had been detrimental to Korea's perception of itself and
the United States. He sought to convince the Koreans that U.S.
interests there — strategic and economic — were long term, and that
Korea would be able to sustain the progress of the early 1960's. As
a result, rather than bargaining over levels of assistance, they

" Subcommittee staff interviews.

'» "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess., Part 6,
July 19 and Aug. 2, 1978 (hereinafter referred to as "KI-6").

167

ame to accept the gradual decline in AID funds and worked with
ilD to put existing advice and assistance to constructive use. AID
ontinued to use its leverage to promote economic reforms, but the
»asis of the relationship was more cooperative.

The AID Mission at the time was one of the largest in the world,
Ath experts available in a wide range of technical fields. AID
»ersonnel worked in the provinces assisting local governments,
'here was extensive consultation between AID and the Govern-
nent, and U.S. planners had full access to Government statistics,
nformation, and intentions. There was a joint review process
uring which the two sides went over all investments and loans,
tern by item. In addition, AID and EPB officials met formally on a
/eekly basis. Dr. Bernstein met frequently with President Park
nd, as a former AID Administrator said, ''tutored" him in econom-
:s. The openness and cooperation between the two sides was re-
arded as ''extraordinary."

Korean implementation of the stabilization program

AID policy and leverage centered around the stabilization pro-
ram, which, as noted, was designed to reform Korean monetary
nd fiscal policies and reverse the inflationary impact of the expan-
ionary policies of 1962 and 1963. Stabilization was to be accompa-
lied by a strategy of growth based on export expansion and boost-
ng Korean economic self-confidence so that businessmen would
ake the necessary risks.

The stabilization program was successfully implemented by the
lOvernment during 1964 and 1965, with the close cooperation of
T.S. advisers in the technical components of those policies.

An important element in this success was the firm control of
conomic and fiscal policies exercised by Chang Key Young, Deputj^
*rime Minister and head of the powerful EPB. Strong centralized
conomic leadership enabled the Government to undertake some
•olitically unpopular reforms during this period, including devalu-
tion of the won by 90 percent and establishment of a unitary
xchange rate. In 1965, the Government allowed the exchange rate
0 float and began to liberalize import restrictions. Freeing the
rade sector was important: economically, it proved the country's
bility to sustain the growth in exports and to afford the raw
naterials necessary to produce goods for exports. Politically, it
ndicated the government's willingness to dismantle a licensing
ystem that promoted corruption and to provide opportunities for
he private sector. ^» In September 1965, the Government— with
American advice — raised the bank interest rate to 30 percent in
rder to increase the level of savings. The policy was clearly suc-
essful; they tripled within a year.^o

At the same time these reforms were being undertaken, each
>rovince was given an export target, as were production sectors
md many industries.^^^ Credit incentives, import privileges, tax
»enefits, and awards for increasing exports encouraged voluntary

'• Op. cit. Cole. p. 89.
*»Ibid.. p. 89.
»• Ibid., p. 91.

168

export production. This campaign, too, was very successful: Export ijw
earnings more than doubled from 1964 to 1966." [ttl

As one trade specialist told the subcommittee, the 1964 reform \ 1"
program was a crucial factor in continuing the high rates of export \
expansion into the later 1960's. She noted, however, that without |
the successes of the 1961 to 1963 period, it would have been politi- i
cally difficult for the Government to implement the reforms. j

The United States played an important role in the successful'
pursuit of the stabilization goals, which centered around \

verbal representations and discussions with government ministers and senior offi- j
cials, with leaders of the private sector, with journalists, and in public speeches. The '
force of this "jaw-boning" was unique in Korea because of the unique U.S. historical
role there, and because the arguments were persuasive in the local context.*^

The U.S. also resorted to leverage, and the release of counterpart 1
funds was made contingent on the ROK Government's success in J
meeting the goals of the stabilization program.

1965: A crucial year in Korean-American relations | ai

President Park visited Washington in May 1965 to meet with|i||[
President Johnson.^^* At that meeting, Johnson urged Park to 1^^
commit Korean troops to fight in Vietnam and also encouraged |j„
Park's efforts to normalize relations between Korea and Japan. As i
a result of the meeting, Johnson committed the United States toMg^
deliver $150 million in development loans. This assistance would
help Park convince his countrymen that the U.S. interest in the
Normalization Treaty was not to provide an opportunity for United
States abandonment of Korea, as was suspected.^^^

The United States wanted Korean forces in Vietnam to demon-
strate the solidarity of U.S. allies and their interests in Asia, and
partially to relieve the U.S. combat burden. The U.S. interest in
normalization of relations between Japan and Korea was both
strategic and economic and dated from the post-Korean war period.
The United States had long

favored the resolution of differences between its major allies in Asia and [had] ajj...
desire to see Korea establish realistic economic relations with neighboring coun-li

tries.2« W

Normalizing relations with Japan would give Korea another trad-j,
ing partner and would alleviate the U.S. aid burden.

Shortly after his return to Korea, Park took steps to carry out
both of President Johnson's urgings. Despite strong opposition jil
within Korea, the Government continued to meet with the Japa- i
nese, and in August 1965 the Japanese Normalization Treaty was ;H
pushed through the National Assembly. At the same time, the
National Assembly also approved the dispatch of troops to Viet-
nam.

Normalization proved to be of considerable benefit to the Korean
economy in both the short and long term. Through it, Korea got
$300 million in commercial credits (raised to $500 million in 1967),

" Bank of Korea, Economic Statistics Yearbook, 1969.

" KI-6.

^*See "Part B: Review of Korean-American Relations," p. 26.

" Op. cit., Cole, p. 107.

'• Op. cit.. Cole, p. 290.

169

X) be provided over a 10-year period from 1965 to 1975.2^ In 1965,
:hese commitments were considerable, since Japanese commercial
oans comprised the second largest single source of foreign funds
:oming into Korea.

President Johnson linked the large amount of development loans
:o the dispatch of Korean troops to Vietnam:

The United States had reiterated, in connection with the recently agreed dispatch
)f Korean troops to Vietnam, that we would give sympathetic consideration to
levelopment loans over and above the $150 million agreed to between the two
^residents. Thus, the United States is expected to provide substantial amounts of
oan financial resources to Korea over the next five years.**

These development loans were the first of several Vietnam-relat-
id compensation packages (see below).

The $150 million development loan component of Johnson's com-
nitment marked a turning point in Korean-American relations
ind a major shift in U.S. thinking. It was a sign of *'the successful
economic momentum created in Korea since 1962." ^9 Although the
Jnited States had been moving steadily from grant to loan assist-
mce elsewhere in the world, that policy had been applied only
ilowly in Korea. In the U.S. Government's view, in the early 1960's
he level of economic planning and administration in Korea had
lot reached the point where the United States could give the ROK
nuch support in the form of loans. Therefore, from 1951 to June
965, only 15 loans, amounting to $99.3 million, were authorized,
iiven while grants were being reduced from 1962 to 1964, loans still
vere not increased, as can be seen by the figures below:

[In millions of doHars]

U.S. assistance

1962

1963

1954

1965

1966

irants

oans

94.6

25.2

81.8
25.8

77.3
27.6

70.7
47.9

64.9
79.0

Source: General Accounting Office, "Economic Assistance Provided to Korea by AID," July 16, 1968, p. 5.

The Koreans, with AID's help, designed projects for the develop-
nent loans in remarkably rapid fashion. From June 1965 to Sep-
ember 1966 alone, an additional 15 loans totaling $155.6 million
vere authorized. This sudden injection of capital, in the view of
leveral former AID officials, provided a major spark to Korean
levelopment.

In addition to the $150 million, AID would lend Korea another
)25 million in the following 2 years as a direct result of the 1965
igreement, and other benefits were also related.^°

""he Second Five-Year Plan: 1967

The success of fiscal and monetary reforms, the dramatic growth
n exports, the trade liberalization steps, the benefits of normaliza-
ion' of relations with Japan, and the great growth of capital re-
ceipts from development loans and from Vietnam-related payments

"Frank, Charles R., Kwang Suk Kim, and Larry Westphal, Foreign Trade Regimes and
x:onomic Development: South Korea, (New York, National Bureau of Economic Research 1975), p.
06.

" AID, Korea, fiscal years 1968-72, program memorandum, revised. May 1966, p. 66.

" Op. cit., Cole, p. 90.

»* Comptroller General of the United States (GAO), "U.S. Agreements with and Assistance to
>ee World Forces in Southeast Asia Show Need for Improved Reporting," Apr. 24, 1973, p. 66.
>ee also "Korean Troops in Vietnam," this section, pp. 174-177.

170

all contributed to the optimism expressed by Korea's Second Five-*
Year Plan (SFYP) for 1967-71. This plan was the first one fully ^
formulated and implemented by the Park Government. It was pre- ^^ |
pared with considerable cooperation from AID and various Ameri- :^
can consulting groups. The SFYP emphasized rapid export growth, g,
with more concentration on labor-intensive industries but contin-jj
ued reliance on imported machinery. Because the United States ..f^j
was reducing grant aid, the plan recognized that Korea would need ,'?,,
to borrow in order to get the necessary capital. The plan alsojjpjf
emphasized increased liberalization of import controls, increased jlel
domestic savings, and price stability. The agricultural sector wasjj*
largely ignored, the major weakness of the plan. |J

As optimistic as the plan was, most goals were reached 2 years jlrai
early— by 1969 — and consequently were revised upward in several j^
areas.

aid's continued impact on stabilization jJ^J

The combination of AID loans. Public Law 480 assistance, mili- 1
tary aid, and Korean esteem for U.S. advice provided the United }
States with continued leverage in the later 1960's, even though its ^ ,,
assistance was declining and Korean self-sufficiency growing. Le- Jf
verage was used for "fiscal and monetary stabilization, export pro- ■ m
motion, private investment, market liberalization,, and manage- jLu
ment." ^^ Absent from the list were social and political reforms. |L,

The U.S. Government particularly wanted reform of monetary -^^
policy. The Government's tendency to expand the supply of money, .^'^^
especially at the time of elections, had to be stopped if the persist- j^jj
ent problem of inflation was to be cured and private savings j|f
encouraged.32 xhe United States also continued to push for a realis- jy
tic exchange rate. While some of the trade reforms it called for , I
were implemented, imports increased sharply in 1968, and the ^h
ROK Government placed additional import items on its restricted m
list.3« li

The interest rate system was also of concern. Although raising ifien
the rate from 16 to 30 percent in 1965 greatly increased bank m
holdings, it created a major problem: It became cheaper to borrow m
abroad. Borrowing abroad increased rapidly in the late 1960's, and li
in 1971 the AID mission felt "that Korea's debt service burden will li
reach the critical level." ^^ From 1965 to 1970, total indebtedness Tl
increased tenfold. Fortunately, earnings from exports outpaced '^^^
debt growth through the end of the 1960's, but the debt obligations '^d
did become dangerously high in the 1970's. !p

The Korean Government voiced objections over the "strings at- ]t
tached to aid," but was still "fully aware" that U.S. decisions were jF
"heavily" influenced by performance in relation to the stabilization ^N
goals.^^^ While U.S. assistance was declining, it was still something :J
Korea did not want to lose. ! "^
fW]'

" Op. cit., AID, fiscal year 1968-72 program memorandum, p.l. '^^

'^Op. cit., AID, fiscal year 1970 program memorandum, p. ii. 1*-

" Frank, Kim, and Westphal, op. cit., p. 56. ' •(]

" Seoul A-177, May 12, 1971. i «0

" U.S. Embassy, Seoul, October 1968. •()

171

role of other countries and international organizations

I The AID Mission had forecast AID's declining role, and as early
1965 was contemplating the best ways to involve other nations
Fid private groups, consistent with U.S.-sponsored stabilization
)licies. The United States had long encouraged international in-
)lvement in Korea's development. In 1965, AID planners ex-
essed a desire to:

* * • encourage broader international and private participation in Korean devel-
» ment through a possible Consultative Group [which was organized and] chaired by
16 IBRD, through bilateral discussions with donor countries, and through contacts
'th private banking and industrial concerns * * *. The U.S. should also use such
i struments as the Consultative Group to convince other nations of the importance
\ conforming their capital assistance and investment programs to Korea's long-
1 -m development needs, including maintenance of stability.'*

Loans from governments other than the U.S. did increase sub-
jantially in this period. From 1966 to 1969, the Government of
apan loaned about $80 million of the total $200 million promised
uder the loan portion of the Property and Claims Agreement of
1e Normalization Treaty. These funds were used for development
< the infrastructure — railroads and communications — and for
]ans to small industries. West Germany authorized about $36
lillion from 1962 to 1969 and another $20 million in 1969. Loans
JDm other goverments amounted to less than $2 million.=*^

The increase in government loans was paralleled by those from
iternational lending organizations. The World Bank (IBRD) and
j} associated banks, the International Development Bank (IDA)
ad International Finance Corporation (IFC), made loans totaling
aout $30 million from 1963 to 1967. In 1969, these institutions
jomised another $80 million, to be used for an irrigation project,
jr relending by the Korean Development Finance Corporation,
ad (through IDA) for vocational and technical training facilities.

As noted, under the Property and Claims Agreement of the
]ormalization Treaty, Japan had agreed to provide $300 million in
rmmercial credits. In 1967, this was raised to $500 million. The
ill amount had been loaned by 1973, two years early. Loans from
brmany and other, mostly European countries also increased
t3adily after 1966. Total commercial borrowing from all countries
icept the United States went from $101.7 million in 1966 to $405.5
lillion in 1969. Borrowing from U.S. commercial sources rose from
i .4 million in 1966 to $217.3 million in 1969.=»«

The only other country besides the United States to provide
jjnificant amounts of grant assistance was Japan. The Property
ad Claims Agreements of 1965 called for $300 million over a 10-
: ar period. These grants, amounting to $30 million per year, made
Iipan the second largest aid donor in the 1960's. They were used
\v purchasing construction goods and raw materials for textiles
J id for developing the fishing industry.

A multilateral source of grant assistance was the United Na-
1)ns,- which provided relatively small amounts for a wide range of
1 ejects from agricultural statistics to pest control and educational
lanning. From 1964 to 1969, about $18 million was provided.

•• Op. cit., AID fiscal year 1967 country field submission, p. CASS-4.
" Op cit., AID fiscal year 1971 country field submission, p. 170.
" Op. cit., Frank, Kim, and Westphal, p. 103.

172
The total amount of grants, by major donor from 1964 to 196i

was: Million

United States -- $334.:|

Japan IfO.

United Nations ^o*

Total 472.:i

Source: AID program memorandum, 1971. |

AID also promoted U.S. direct private investment: \

U.S. buyers and a producers should be encouraged to look at Korea as a source o:
supply for inexpensive high labor content projects and subcomponents. AID invest
ment guarantees, survey assistance funds, and possible joint AID-private investment
enterprise . . . should be utilized to promote increased U.S. private direct equitj
investment in Korea.^*

The Korean Government instituted various measures, such as
the 1966 amendments to the Foreign Capital Inducement Law oj
1960, to encourage investment and facilitate loans for investment
However, its attitude toward direct investment was ambivalent
because it feared control by foreigners. For example, for the firsl
few years after the Japanese agreement, the Korean Government
discouraged Japanese direct investment. Thus direct foreign invest-
ment was slow to develop and amounted to very little in the 1960's
(see table below). However, while it made only a small contribution
to industrial expansion, it was still important in that it introduced
modern technology and marketing and management techniques
into Korea.*®

DIRECT INVESTMENTS

[In millions of dollars]

Year Approvals Arrivals-

1963 $5.4 $5.5

1964 1.1 .6

1965 22.3 6.3

1966 4.5 14.3

1967 24.8 10.0

1968 32.8 17.6.

1969 13.1 3.3'

Total 105.0 57.6

Source: AID, Country Field Submission, 1971, p. 154.

MILITARY ASSISTANCE AND THE ECONOMY IN THE 1960'S

The U.S. role in the Korean economy in the 1960's cannot be
addressed without looking at the contribution and role of U.S.
military assistance. ] ™

American interest in Korea's economic condition had been based
on a belief that a stable, militarily strong, and pro-American gov-
ernment in Korea was essential to U.S. strategic interests. Both
economic assistance and military assistance were designed to
achieve that goal and were mutually supportive. In the early
1960's, economic assistance programs provided much of the sup-

'• Op. cit., AID, fiscal year 1967 country assistance program, p. CASS-4. Despite these goals, i
some businessmen felt that the redtape involved in direct investment was a means of discourag
ing U.S. business in Korea.

*"0p. cit., AID, fiscal year 1971 country field submission, p. 153.

173

rt— 96 percent for the Korean defense budget, which went large-
A for salaries and benefits. As U.S. assistance declined and the
r^ idget grew, the percentage of support declined to 64 percent in
i 166 and about 14 percent in 197 1.-^^ Military assistance programs,
^ . turn, provided for most of Korea's defense hardware, which
'i eed Korea's foreign exchange for other purposes. Spending by

.8. forces in Korea and U.S. compensation for Korean troops in

ietnam also contributed to the growth of the Korean economy.

3cause of U.S. aid, Korea, with one of the world's largest standing
^ ^mies, had to spend only 4.6 percent of its GNP on defense in

■" Military assistance program

3 Military assistance was provided primarily through the military
^ ' isistance program (MAP), administered by the Department of De-
f' ttse. Two other military channels were: (1) Compensation for
^ arean troops in Vietnam, and (2) earnings generated by U.S.
'" rces stationed in Korea.

^^ The MAP program consisted of grants which Korea could use to

'? tain military equipment and supplies services from the United

"• ates. In addition, the United States provided surplus defense

tides valued at one-third their acquisition costs. From the end of

^e Korean war through 1971, grant MAP assistance totaled more

Ian $3 billion and amounted to about $200 million per year

1 rough 1972. The value of surplus articles totaled about $200

lillion from 1946 to 1971."

In the early years of the MAP program, the Korean Government
lied MAP dollars to purchase "operations and maintenance" (O. &
'..) items, rather than investing in up-to-date equipment. From
; 60 on, the United States tried to get the Government to use MAP
c liars to purchase equipment that would modernize its forces and
1 spend more of its own funds for O. & M. purchases. The MAP
lansfer program, sporadically implemented in the early 1960's,
^is designed to accomplish this objective by transferring certain
I penditures from MAP to the Korean defense budget.
The MAP transfer program was stronglv resisted by the Korean
<)vernment, which saw it as a means for the United States to
iduce MAP allocations. One senior U.S. military official speculat-
I that the Koreans felt:

ithey take $10 million worth of consumables (O & M) and put it into the won
Idget, they will automatically get that $10 million cut from the MAP program."

In 1966, the United States agreed to suspend the MAP transfer
] ogram for as long as Korea maintained two divisions in Vietnam.
iJtually, the program was suspended from 1966 through 1970. The
iilure to implement the transfer program consistently meant that
])rea actually spent few MAP funds in the 1960's to upgrade its
irce?. Thus the need for the U.S. modernization plan (see below) in
'71 was all the greater.

' Op. cit., AID, fiscal year 1969 program memorandum, amnex A.

• Comptroller General of the IJnited States (GAO), "U.S. Assistance for the Economic Devel-
Caent of the Republic of Korea," July 12, 1973, pp. 57-59.
;' Subcommittee staff interview.

174

The value of MAP and the surplus defense articles program U
the- Korean economy was difficult to determine. It depends on ar
estimation of what domestic resources Korea would have used t(
procure or maintain the same or similar items. In the opinion o:
some, the programs may even have had a negative impact on some
aspects of Korea's economy and defense capabilities. For example
if Korea had not used MAP dollars to purchase U.S. steel tent pegs
and had instead developed a factory to produce them, it would have
created employment and also freed U.S. resources for equipment
Korea could not manufacture.

Funds accruing from U.S. forces in Korea came from in-countr}
expenditures by troops and from procurement of local goods anc
services to maintain the troops. Funds were earned from purchases
by U.S. personnel and dependents, expenditures in connection with
activities that were not supported by U.S. appropriations (i.e., the
PX), salaries of local nationals and procurement of material, sup
plies, and construction. It is estimated that the foreign exchange
earned by Korea in this manner was about $160 million per year.*-

Korean troops in Vietnam

Korea's first combat troops were sent to Vietnam in 1965. Ib
connection with that dispatch. General Howze, commander of the
U.S. Army in Korea, wrote a letter in July of that year in which
the United States agreed to give an additional $7 million in MAP
funds for fiscal year 1966, suspend the MAP transfer program foi
fiscal year 1966, modernize Korean forces in Korea, and equip
supply, and pay overseas allowances for the deployed troops.*^

In 1966, when Korea agreed to deploy additional forces. Ambas-
sador Winthrop Brown signed a new agreement, which became
known as the Brown Memorandum, which significantly expanded
the areas and amounts of U.S. compensation.*^ Briefly, it provided
for compensation in six major areas:

** Procurement problems are discussed on pp. 215-225 of this section.

** "United States Security Agreements and Commitments Abroad, Volume II," hearings befonl
the Subcommittee on United States Security Agreements and Commitments Abroad of th<
Committee on Foreign Relations, U.S. Senate, Feb. 24, 25, and 26, 1970, p. 1569.

«0p. cit., GAO, U.S. Agreements * * *, p. 28; for the text of the Brown memorandum, seei
appendix C-81.

Its
mi

175

(1) Expanded economic assistance. — $150 million in develop-
ment loans for 1966.*^ About $25 million in related develop-
ment loans were also provided in 1967 and 1968.*«

(2) Overseas allowances.— Through 1970, $130 million. U.S.
salary pa3mients for Korean troops, beyond the base pay pro-
vided by the Korean Government. The rates were up to 23
times more than a Korean private's home pay; ** several thou-
sand dollars of the averaige soldier's pay was repatriated to
Korea, a valuable source of foreign exchange.

The funds were actually remitted to the Korean Government
who paid the soldiers. GAO noted that ''U.S. military officials
did not have specific knowledge on the disposition of funds
paid to the sponsor governments." ^^ Several former State De-
partment officials believed that the soldiers were actually paid
at rates ''which were substantially less" than those paid by the
United States, but still higher than the ROK Government
would have paid on its own.

(3) MAP transfer program suspension. — Provided savings to
the Korean Government of about $93 million.^^

(4) Net additional costs. — Through 1970, $44.8 million. Korea
had agreed to send two divisions as long as its own security
was not jeopardized. The United States therefore had agreed to
set up two Korean replacement divisions (the terms of the
memorandum refer to "reconstituting" some of the deployed
forces). About 75 percent of this assistance went for salaries
and other benefits; other costs included supplies, facilities, and
communications.*^

(6) Expanded business opportunities. — Through 1970, $305.4 mil-
lion. Several AID and State Department officials who served
during the period from 1965 to 1973 commented on the value
of the opportunities in Vietnam for Korean civilians. One offi-
cial called Vietnam the "El Dorado" of Korea— a place to
make a quick fortune."

See p. 169 of this section.

Op. cit., GAO, U.S. Agreements ' * *,p. 28.

Stentzel, James/'Seoul's Second Bonanza," in Far Eastern Economic Review, July 30, 1973.

Op. cit., GAO, U.S. Agreements ' * ', p. 28. Governments other than the Korean Govern-
nit also agreed to send troops to Vietnam. The arrangements and payments varied. Other
fi es came from Thailand, Philippines, Taiwan, Australia, New Zealand, and Spain. Korea
p vided the largest contingent and received the bulk of payments.

Op. cit.. Aid fiscal year 1969 program memorandum, annex A.

Op. cit., GAO, U.S. Agreements ' * ', p. 33.

Subcommittee staff interview.

176

[In millions of dollars]

Fiscal year

1965 1966 1967 1968 1969 1970

U.S support:

a. Transportation of Pers/Equip ^

b TEfill (100 percent) of RR Div 6.4

c O'seas Allowances... 367 8.863 29.754 35.848 37.036 18.200

d Death and Disability 654 1.690 3.439 2.872 1.800

e. Equip Forces Deployed 0 3.900 .700 .700

f. Improve Firepower, Mobility and

Commo of ROKA and ROKMC

Forces in Country ^

g. Med Evak to Korea »

h. Modernize Forces in Korea 2 10.0 10.0

i. Finance Net Add'l Costs 5.896 14.713 14.824 9.400

i Reconstitute Deployed Forces 25.600 4.800 9.800 7.400 4.300

k. Contribute to CI Req * 200 .200 5.400 .500 .200

I. Provide Equip for ROK Arsenal

Expansion ^ 2.600

m. Provide Sole-use Commo facili-
ties 1.314 007 .38

n. Provide 4 C-54 AC 1.200 .600 .400 1.200 .400

0. Provide improvement of Military
Barracks and Sanitation faci-
lities from MAP Proceeds of

MAP Excess Sales 657 .583 447

p. MAP Transfer Suspended « 4.600 10.300 18.400 27.100 32.800

q. Provide Combat Rations 6.100 12.300 5.600

r. Procurements in Korea « 9.6 11.9 15.2 9.1 5.0

s. Expand Korean Contractor

Opportunities ^ ^

t. Procurement of Military Goods

and Svcs for U.S. Forces « 32.0 32.0 32.0 32.0 16.0

u. MSTS Contracts 3.0 3.0 3.0 3.0 1.5

V. TDY support 9 .8 .4

w. Special leave support 7 .7

X. Assistance in Kind 09 .7 1.6 2.0 1.5 1.1

Total costs, fiscal years
1965-70

^ Costs of troop and military equipment shipments are not available to this headquarters but are maintained by the Military Air
Command, Scott AFB, Illinois 62225, and Department of the Navy, Military Sea Transportation Service, Washington, D.C. 20390.

2 Costs included in $10,000,000 add-on to fiscal year 1966 Korea MAP as shown in item h.

'These costs controlled by COMUSMACV.

"In addition, $9,200,000 were absorbed within the two $10,000,000 add-on packages of fiscal year 1966 and fiscal year 1967
shown in item h.

*An additional $1,700,000 was absorbed in the $10,000,000 added-on in fiscal year 1967; an additional $900,000 was absort
in fiscal year 1968 MAP.

^In addition to being a U.S. budgetary cost these programs involve a Goldflow.

' Costs not available by fiscal year.

Note.— There were no U.S. costs in Korea during fiscal year 1964 in support of ROK forces deployed to Vietnam. Fiscal year 18
figures reflect the costs from July 1, 1969 through Dec. 31, 1969.

(6) Expanded procurement by AID and the military.— Throng.

1970, $194.8 million. The GAO, however, reported that item

(5) and (6) contributed some $700 million to Korea's foreig

exchange earnings from 1966 to 1970."

As GAO noted in 1973, estimating total U.S. payments resultin

from Korea's Vietnam venture was difficult due to the lack of datf

In 1970, the Department of Defense submitted estimates to Senate

Symington's Subcommittee on U.S. Security Agreements and Con

mitments Abroad, which are duplicated above; they came to $92

million.''^

*♦ Op. cit., GAO, U.S. Agreements * * ', p. 68
»» Ibid., p. 1571.

177

^ However, GAO's estimate came to about $1.3 billion. The differ-
ace was due in part to the GAO's valuation of facilities and
• [uipment supplied to Korea which the United States did not
:tend to replace.** A Defense Department spokesman argued that

e cost was less than the figures indicated, since some of the
i[uipment would have been provided anyway.*' For example, the

nited States would have modernized Korean forces and trans-
irred some equipment, including counterinfiltration systems.
Nonetheless, even without counting the excess equipment and
' nodernization" provided, the United States greatly desired
brean troops for political and military reasons and was willing to
]iy about $1 billion for that assistance.

i Another aspect of the question is how much the Vietnam earn-
j gs contributed to the growth of the Korean economy. In the early
; ars of participation — 1966 to 1968 — the impact was significant,
'le economic upswing had just started and Korea was vigorously
jirsuing a policy of maximum export expansion. Foreign exchange
lis essential, and the marked increase in these earnings after 1966
MS due, in part, to proceeds from Vietnam. Although, according to
I G AO report, Korea did not profit from the Vietnamese war to the
I tent that Japan profited from the Korean war, AID estimated
lat from 1966 through 1972 Korean foreign exchange earnings
hm Vietnam totaled $925 million." However, as Korea's export
J owth and earnings expanded at a rate of 40 percent per year, the
ilative importance of the Vietnam-related earnings declined.
Ising GAO's per year estimate of Vietnam earnings from 1966 to
:70 as $200 million, in rough terms, they provided 40 percent of
i reign exchange receipts in 1966, but only 15 percent in 1970."
jevertheless, because Korea suffered chronic shortages of foreign
j^ change, even that 15 percent was important. ^°

THE KOREAN ECONOMY BY 1969

The 1960's were marked by the increasing economic independ-
Lce of Korea. The significant achievements of this period were:

(1) The GNP increased from $2.22 billion in 1960 to $5.63
billion in 1970.

(2) Per capita GNP rose by 90 percent from $90 in 1960 to
$171 in 1970.

(3) Exports of goods and services went from $117 million in
1960 to $1.37 billion in 1970, a 1,000-percent increase.

Op. cit., GAO, U.S. Agreements * ' ', p. 9.
^^ Ibid., appendix III.

•Op. cit.. GAO, U.S. Assistance * * ', p. 60.

•Op. cit., AID, fiscal year 1970 program memorandum, p. 85-86. "The dramatic increase in
ii-isible receipts, which went from $114 miUion in 1965 to $323 million in 1967, is expected to
t ne to an end this year. The principal cause of this phenomenon has been the Korean receipts
Im Vietnam. Procurement by the military within Korea for shipment to Vietnam and the
1 )atriation of the earnings of the Korean troops stationed there has been responsible for the
I irp increase in receipts from the military, while the repatriation of earnings by civilians and
citract orgsmizations in Vietnam caused the more than eightfold increase in 'other services'."

* Korea's participation in Vietnam resulted not only in an increase in foreign exchange
«-nings, but in an increase in self-confidence. "Korea will seek from this [commitment in
' itnam] a new level of equality in its relationship to the U.S. and a new sense of independence
i its international relations." 'This outcome had an effect on Korean- American relations which
i D foresaw. "We cannot but expect that as this trend continues, it will involve initiatives and
1 ions not wholly in line with what we, the United States, would have Korea do." (AID fiscal
; irs 1968-72 program memorandum, p. 9). In fact, when the United States wanted to deesca-
1 e in Vietnam, beginning in 1969, the Korean Government protested strongly.

178

(4) Foreign aid revenue as a percent of total GovernmeriUl
expenditures dropped from 30 percent in 1960 to 4 percent [0

■ 1970." irel

As the economy grew stronger, AID was able to move from graiijfsi
assistance to loans and then even to reduce those. By 1967, suppor-iiii
ing assistance and Public Law 480-generated funds were no longejd
adequate to provide two-thirds of the military budget. That realizj: fie
tion, according to AID, was "traumatic" for the Koreans and alS|i;jj
worried the U.S. military, which was afraid of Korean militar, 51
cutbacks. For these and other reasons. Public Law 480 levels wei »|
increased in the late 1960's so that the aggregate level of assistancijiji
remained fairly constant throughout the 1960's.«=^

Despite a shift in emphasis in economic assistance to long-ten |
development, the United States basic overall strategy remained tbl
same: Maintenance of Korea's military strength. The linkage (i
military budget support to economic assistance led to distortions i
the purposes of economic assistance in the 1960's that continue:'
into the 1970's. The extent to which they were tied in the minds ( li
the Koreans was shown by the attitude of a high-ranking official i; i(c
1966. In connection with discussions of U.S. compensation fc m
troops in Vietnam, the Korean official argued "for a commitmerji:^
of support of three-fourths of the military budget through 1971."
Although the Korean Government came to realize this would b
impossible, the argument had been based on the U.S. commitmerj
in the early 1960's to support two-thirds of the Korean defens,
budget through economic assistance programs. ,

The Department of Defense showed a proprietary interest ij
economic assistance. In the 1960's, it was reluctant to see U.I!
grant assistance decline and be tied to specific development pro
ects. Because the Korean Government used U.S. assistance-genera
ed currency to support the operation of the armed forces, th|
Defense Department was worried the Koreans would cut back i
this area.®*

The United States frequently used AID supporting assistanc
and development loans as leverage to encourage Korea to mak
economic reforms and, to a limited extent, concentrate greate
resources on the rural sector. As late as 1968, AID withheld ai
thorized development loans because the Government failed to in^
plement certain reforms. However, U.S. leverage declined as assis>
ance programs declined.®^ Although Public Law 480 increased a

•' Op. cit., Brown, pp. 296-7.

" One of aid's goals was to: "Ckwrdinate U.S. military and economic assistance objectives
the use of budget support funds. Because of declining availabilities of aid-generated loc
currency, and in keeping with non-inflationary management of counterpart funds, there may li
efter 1966 insufficient amounts of such currency to support two-thirds of the military budg
and still provide meaningful support to the economic development budget. The United Stat*
should, therefore, during ROKG preparation of its 1967 budget, seek to assure itself that ROK
revenues will be sufficient, in association with releasable aid-generated currency, to suppa
basic military requirements, consistent with U.S. objectives, as well as necessary development
expenditures and assure itself that the ROKG will so use its revenues even should U.S. militaji
budget support fall below two-thirds support. If the Country Team decides that such assurani
cannot be obtained, then the Countrv Team shall review the effects on stabilization and growli
objectives of: (a) a release of "frozen ' counterpart sufficient to meet budget requirements, or (i
allocation of SA [supporting assistance] or Public Law 480 beyond that required to m»f
essential import requirements." Op. cit., AID fiscal year 1967 country assistance program,
CASS-4.

"Op. cit., AID, fiscal years 1968-72 program memorandum, p. 69.

*• Subcommittee staff interview.

"See chart on p. 163 of this section.

179

iupporting assistance and development loans declined, it was not a
I source of leverage since AID did not control the allocation and
•elease of funds.«« In the final analysis, AID was able to arrive at
•easonable levels of grant and concessional loan assistance, and
hen successfully to withdraw for the most part from direct in-
volvement in the economy. It had also been able to encourage the
Government to implement many politically unpopular economic
eforms. While some opportunities may have been missed for en-
ouraging political and social reforms, particularly with respect to
igriculture and urban labor, overall AID's record in Korea in the
960's was strong.

SPECIAL PROBLEMS IN KOREAN ECONOMIC DEVELOPMENT IN THE

1960'S

As is clear, Korean efforts, assisted by U.S. military and econom-
assistance and advice, resulted in dramatic economic growth in
he 1960's. However, this growth did not benefit all sectors of
Corean society equally, nor were all sectors of the economy given
qual attention in economic planning. Both the agricultural (and
ural Korea in general) and urban labor were largely neglected.
Ironically, Korea's agricultural growth was respectable compared

0 that of other developing countries, but in terms of other sectors
f the Korean economy, it lagged behind. The increase in farmers'
Qcomes in the 1960's did not keep pace with that of urban work-
rs.^' By the mid-1960's, AID noted that Korea's policy of purchas-
ng some domestic food grains at below market prices allowed only
ninimal increases in farm incomes. This policy and the resulting
low growth of farm incomes was due both to the Government's
fforts to reduce inflation and to the necessity of providing inex-
pensive staples to the low-paid urban workers.^®

By 1969, AID had come to view the disparity between agricultur-

1 and urban incomes as a serious economic and political problem:

** Seoul, October 1968. "In view Korea's rapid economic progress, we are now looking
)rward termination SA [supporting assistance] grants in very near future and phase down all
orcessional assistance. How soon this achieved depends heavily Korea's economic performance.
.Ithough U.S. aid steadily declining and successful phase-out aid program coming into view,
:onomic policy negotiations with ROKG in connection AID program of key importance. Infla-
ionary pressures in Korea continue strong, but since 1964 have been forcefully controlled,
dditional resources from U.S. concessional aid necessary both to insure continued rapid growth
nd to provide incentive margin persuade ROK maintain sound economic policies. It is our
rategy next 2 years gain maximum leverage obtainable from increasingly limited U.S. aid
-^sources to help assure continued sound economic policies on part ROKG. This particularly
nportant though somewhat more difficult because amounts aid involved on our part declining. '
owever, due to actions by the military, the White House, and certain Congressman, both
ublic Law 480 and development loans continued longer than AID planned in 1968.
" AID, Korea fiscal year 1970 program memorandum, July 1968, pp. 34 and 200; Kuznets,
aul W., Economic Growth and Structure in the Republic of Korea (New Haven: Yale Universi-

Press, 1977;, pp. 94-99; Rao, D. C, "Economic Growth and Equity in the Republic of Korea"
1 World Development, 6 (1978), p. 388.

** Since the 1950's, the Korean Government has exercised varying degrees of control over the
omestic price of some staples, primarily rice. As rice consumption increased in the 1960's due
') its low cost, the Government applied the same policy to barley in an effort to reduce rice
onsumption. The priority of increasing exports and the need for cheap labor appeared to have
?en a major factor in this policy toward the agricultural sector. To keep wages low and counter
le potential for political problems that such a strategy risked, the Government purposefully
)ught to keep food prices low. The basic legislation enforcing this policy has been the Grain
(anagement Act of 1950. In 1973, the Park regime issued the food control law which rationed
le consumption of certain commodities and set production goals for farmers. See also AID,
orea, fiscal year 1970 program memorandum, July 1968, p. 151; AID Korea, fiscal year 1971
)untry field submission, August 1909, p. 231; op. cit., Kuznets, p. 145.

35-508 O - 78 - 13

180 -

In 1963, farmers earned 16 percent more than urban workers, but by 1968 urban
workers earned 38 percent more than farmers. ♦ ♦ ♦ These wide disparities in
income distribution and purchasing power seriously retard the national economy by
(a) reducing farmers' means for expanding production and (b) reducing the capacity
of the rural sector to purchase goods produced by urban populations. With farm
population making up more than half the national total, and with 40 percent of that
population at subsistence level, these efforts are of substantial economic magnitude.
They also represent a potential source of serious social instability and political
disaffection.*"

AID itself did make some effort to encourage attention to the
agricultural sector in the 1960's. Public Law 480 Title II programs
in particular helped develop and reclaim land, and technical assist-
ance programs provided training for managers in these sectors.

The Korean Government, too, eventually focused its attention on
the agricultural sector. In 1968, when agricultural incomes were
exceptionally low, it increased investments in the rural sector and
took steps to raise rural incomes and encourage grain production.
A year later, however, the Korean Government returned to its
policy of purchasing domestic grain at low prices, which continued
into the IQTO's.-^^

AID also noted, in 1966, that urban labor was another "source of
disequilibrium" and that *4ts political potential is expected to in-
crease," although "to date labor has not been significant socially or
politically." The mission further pointed out that "[t]rade unions
are largely government controlled and still relatively weak."'* Due
to "low prcxluctivity and still considerable unemployment," AID
did not feel the unions were likely to have their demands met.'*
However, in 1966, the U.S. Embassy placed a labor attache on its
staff, while the AID mission brought in manpower advisers.

With respect to its role resolving in this social disequilibrium,
AID officials concluding, in 1967, that:

the most effective means of assistance to labor policy and leadership in Korea lie in
helping the government in its manpower development programs and in developing
in-country training of labor leadership.''

One AID mission director, Joel Bernstein, said that labor condi-
tions and labor unions were "not an issue so we really pursued no
dialog, no policy one way or the other. We simply weren't
involved.'*

Though the unions were "in the very early fragmentary stage"
in the mid-1960's, but by the late 1960's strikes for higher wages
and better working conditions spread throughout the country. By
the latter 1960's, the AID mission felt that labor had experienced a
great improvement over its situation a few years earlier. ^^

Dr. Bernstein pointed out that AID did not use its funds directly
to promote political liberalization. AJD's most important contribu-
tion to "social democracy" would come from the "tremendous ex-
pansion of the range of meaningful choices" that Koreans had jobs,
places to live, education, and "disposal of their earnings for con-
sumption or investment."'*

••Op. cit., AID, Korea, fiscal year 1971, pp. 240-241.

»• State 202456, Dec. 4, 1969; op. cit., Rao, p. 378.

" AID, Korea, fiscal years 1968-72 program memorandum, revised, May 1966, pp. 22-23.

" AID, Korea, fiscal year 1969 program memorandum, Part I, July 1967, p. 15.

" Ibid.

'* KI-6.

» Ibid.

'• Ibid.

181
KOREAN-AMERICAN ECONOMIC RELATIONS IN THE 1970's
Introduction

The role of the United States in the development of the Korean
economy and the formulation of Korean economic policies and
programs had undergone a transition in the 1960's which continued
into the 1970's. By the latter part of the 1960's, the economy had
entered a period of sustained growth to which the U.S. role had
been crucial. That growth reduced Korean economic and psycho-
logical dependence on the United States and, with it, U.S. influ-
ence.

In certain respects, during the 1970's the U.S. role in Korea's
3Conomic development further declined in importance. The econo-
my continued to expand at an average rate of over 9 percent a
year, while official U.S. economic assistance declined in value. The
Korean Government formulated its Third and Fourth Five- Year
Plans with virtually no U.S. advisory assistance, and the AID
contribution to the implementation of these plans was minor.

Nevertheless, the United States did play an important role in the
Korean economy in other ways throughout the 1970's, especially
with respect to Korea's foreign exchange needs. The economy was
leavily dependent on foreign trade and reliant on increasing
amounts of foreign capital. That dependence left it extremely vul-
nerable to the vicissitudes of a changing international economy
>uch as occurred in the 1970's, a time of extraordinary upheaval
worldwide. In August 1971, President Nixon announced a New
Economic Policy which, among other things, suspended full con-
/ertibility of dollars into gold (in effect dismantling the post- World
iVar II monetary system) and imposed a 10-percent surcharge on
ill imports into the United States. In November 1973, the Organi-
^tion of Petroleum Exporting Countries quadrupled the price of
)il, dramatically shifting the balance of trade and economic power.
These events affected the economies of nations throughout the
vorld. For Korea, so dependent on international trade and finance,
;he events were enormously disruptive. Moreover, domestic policies
;uch as the monetary expansion before the Korean elections in
1971 exacerbated the impact of these events.

The United States was important to Korea's overcoming the
lifficulties of the early 1970's. It was Korea's principal source of
ow-interest foreign exchange; it encouraged other donors to pro-
dde funds; and it strongly influenced Korea to undertake political-
y unpopular policies and programs necessary for Korea's economic
lealth. Moreover, throughout the 1970's, both during crisis situa-
dons and periods of relative tranquility, the continued U.S. mili-
tary presence and assistance strengthened investor confidence and
•elieved Korea of a portion of its defense burden, enabling it to
ocus resources on economic development and stabilization.

Despite the successful cooperation of the United States and
^orea in responding to these external problems, the 1970's did
vitness some serious conflicts between the two countries. For ex-
imple, what Korea perceived as a direct and serious threat to its
economic growth occurred in the early 1970's, when the United
states sought to restrict imports of Korea's most important

182

export— textiles. The need for this action indicated the success of
U.S. efforts to create a strong Korean economy— Korean was begin-
ning to compete with certain American industries. While South
Korea saw the episode as an attempt to limit its full economic
potential and as a break in the long-standing special relationship,
the United States saw it as the first request made of a friend it had
supported for many years. Other conflicts were the Public Law 480
rice scandal, the changes in the nature of U.S. assistance, and the
difficulties in getting congressional funding for the military mod-
ernization program.

Nevertheless, the major international events of the 1970's — the
aftermath of President Nixon's new economic policy and the inter-
national oil crisis — showed that the United States could continue to
play a constructive role in Korea's economic development, and the \
relationship between the two survived their conflicts. Both coun-
tries recognized that a new element in their relationship had
emerged, as, for the first time, Korea's economic activities were
having an impact on the United States.

Korea emerged from these troubled times with a dynamic econo-
my and today is an important force in the world economy, on the
verge of graduating from the ranks of the developing countries.
This remarkable achievement was the result of determined leader-
ship and the disciplined, hard-working Korean people, with the
assistance of the United States as financier and adviser.

The Third and Fourth Five-Year Plans

The first two Five-Year Plans had stressed industrial growth and i
development, with a secondary emphasis on rural growth and
social development. In the Third Five-Year Plan which covered the
years 1972-76, Korean planners adopted as the key phrases "bal-
anced growth" and "balanced economy." There was, of course, still
a strong focus on exports, which were to triple between 1972 and
1976, with imports only doubling. Investment was to be spurred by
increased domestic savings. In the industrial sector, the emphasis
was to be on heavy and chemical industries. The annual growth
rate in the GNP was projected at a modest 8.6 percent per year,
reflecting the shift to a balanced economy.

Perhaps the greatest change in Government policy was increased
attention to the rural sector, particularly agriculture. The princi-
pal goal was self-sufficiency in food grains, but the Third Five-Year
Plan also stressed improvement in the quality of rural life by
increasing rural incomes through commodity exports; improving
housing, health care, and social security programs; and increasing
educational opportunitities. The plan also projected a decrease in
the annual population growth rate to 1.5 percent by 1976.

In 1974, the Korean Government revealed its Fourth Five-Year
Plan, detailing its development goals through 1981. The Plan em-
phasized "A GNP growth rate of 10 percent, expansion of exports
faster than GNP, and the industrial sector leading the way in
providing the major portion of these exports." ^'

aid's own objectives in the 1970's coincided with those of the
Third and Fourth Five-Year Plan. Its overall goal remained:

"AID, Korea, fiscal years 1975-81 development assistance program, February 1974, p. 47.

183

* * to see South Korea able to be independent of external domination * * *
momic self-sufficiency is * * * an absolute prerequisite to the satisfaction of this
^objective * * * Internal political and social viability is also prerequisite. Recent
years' experience in Korea has shown that not just economic growth, but rapid
economic growth, contributes significantly to this goal * * * Enlarged prospects for
individual opportunity are provided by an expanding economy in the modern world,
rhese factors should also decrease the high dependence on the United States and
should lead to the acceptance and rooting of an economic, social, and political order
which fulfills the requirements for the American interest and basic policy objective.
[t is for the foregoing reasons that we recommend that the U.S. should continue to
support a high growth rate policy in Korea within a frame of declining and termi-
lal economic assistance.'®

Because AID viewed the economy as having become virtually
self-sustaining, its role in the 1970 s shifted away from develop-
ment of the infrastructure and industrial growth to "concern with
,5ome social aspects of Korea's development as well as agricul-
:ure," ^® paralleling, to an extent, the shift in emphasis outlined by
i:he ROK Government.

This shift also conformed to AID's worldwide change of policy
esulting from the 1973 amendments to the Foreign Assistance Act.
n enacting those amendments. Congress called for AID "to help
,:he poor majority in developing countries raise their living stand-
ards beyond subsistence levels.' ®^ Under the "New Directions Pro-
-am", AID focused on three areas: (1) food and nutrition, (2)
copulation and health, and (3) education and human resource de-
velopment. AID also was directed to encourage, recipient nations to
ievelop programs to asistire that the benefits of economic growth
vould be applied to all lectors of society. ®^

aid's role in formulating the Third and Fourth Five- Year Plans
lad been minor, involving only occasional consultations with
i^orean planners. According to an AID document dated August
:972:

• * * ROKG pwlicy makers and planners are now defining national priorities
dentifying problems with minimal external assistance. Given this ability within the
lOKG, economic planning assistance is no longer necessary nor approprite.®^

American involvement in implementing the Third and Fourth
^ive-Year Plans was also less than in the past. Support was limited
0 research and training programs in agriculture, family planning,
education, science and technology, and the private business sector,
^""unds also went to the Korean Development Institute and the
-Corean Institute of Science and Technology.

AID officials projected a limited role in supporting the fourth
)lan, in line with Korea's improving expertise and AID's "New
directions Program." They pointed out that AID should be pre-
pared to increase its involvement "only in case of serious repercus-
;ions adversely affecting Korea's growth plans, stemming from in-
ternational economic crisis * * *.^^ On the whole, AID planned to

'*0p. cit., AID, fiscal year 1971, country field submission, p. 5.

'• Seoul4233, July 16, 1971.

*° House Committee on International Relations, Implementation of "New Directions" in Devel-
pment Assistance, Report to the Committee on International Relations on Implementation of
legislative Reforms in the Foreign Assistance Act of 1973, prepared by the Agency for Interna-
lonal Development, Washington, D.C., 1975, p. 64.

" Ibid., pp. 1-5 and 63-86. See also House Committee on International Relations, New Direc-
lons in Development AID: Excerpts from the Legislation (as of January 1977), (Washington,
).C. 1977), pD. 1-2.

"AID, Korea, fiscal year 1974, development assistance program, August 1972, p. 7.

**0p. cit., AID, Korea fiscal yeart 1975-81 development assistance program, p. 47. The new
irections program was instituted in 1973 and is discussed in greater detail on p. 105.

184

reduce assistance significantly and to phase out completely by

1981

The ROK Government estimated a need of about $8.5 billion in
foreign capital from 1975 to 1981 in order to reach its development
goals.** AID assistance to Korea, however, declined significantly in
these years, and the assistance was for projects in the three areas i I
prescribed in the new directions program. | |

18'

AID ASSISTANCE TO KOREA: 1974-78
[In millions of dollars]

Assistance 1974 1975 1976 1977 1978

Loans 25.0 18.2 5.3

Grants 1-7 1° 0.6 i^|.,

Housingguarantees* 20.0 35.0 30.0 25.0 25.0 |f!

Total 46.7 55.0 30.9 25.0 25.0

* Significant source of AID assistance to Korea in the 1970's has been the Housing Guaranty Program. Through this program "U.S.
private sector lenders provide long-term financing for low-income housing programs in developing countries. The United States -M
Government underwrites these transactions through the provision of a full faith ana credit guaranty. The AID guaranty will compensate
U.S. lenders for losses. Maximum interest rates to U.S. lenders are established by AID and reflect the current cost of money in the U.S.
mortgage market." AID, Office of Housing Guaranty Program, "Annual Report, FY 1977," p. 2.

Source: Agency for International Development.

AID planned to provide no more than $22.5 million in assistance
to Korea between 1978 and 1981.«» '^^

In the earlier years, the extent to whicn the U.S. role in the
third Five- Year Plan had declined would have caused Korean offi-
cials great concern. By the early 1970's, however, it was accepted,
as indicated in an AID memorandum of May 1974:

For a number of years the Ambassador, USAID Director, and AID/W officials
have been sending low-key signals to the ROKG that Korea was reaching the state
where she would be capable of sustaining strong economic growth without large
amounts of concessional AID assistance. These signals were received calmly and
with quiet acceptance of their accuracy. Adverse reactions to these expressed inten-
tions to terminate the AID program have been minimal to nonexistent." ^^

Rural and urban programs

One key feature of the Third Five- Year Plan, as noted, was
* 'emphasis * * * to measures and investments needed to achieve a
parity of incomes of rural households with those of the urban
areas." ®' Rural incomes got their first big boost from the Govern-
ment's agricultural price support program for grains and subsidies
for agricultural inputs announced in the ''Third Five- Year Plan."
At the same time in 1972, with the Saemaul Undong or the New
Village Movement, the Government undertook a major develop-
nient program in rural Korea. The Saemaul Movement was de-
signed to increase rural development and improve the rural stand-
ards of living. The Government made improvements in irrigation
and storage facilities, built roads and bridges, introduced new seed
lines, and expanded the amount of land under cultivation. As a

•* Ibid., p. 48.

**0p. cit., AID, Korea, fiscal years 1975-81, development assistance program, p. 78.

»* AID Memorandum, May 7, 1974, p. 3.

'^Op. cit., AID, Korea, fiscal years 1975-81, development assistance program, p. 47.

185

3sult of these policies, rural incomes rose substantially by the mid-
970's and the quality of life in rural Korea showed great improve-
lent.®*

Urban labor's incomes rose in the 1970's, as in the 1960's, but as
3cently as 1975 the monthly incomes of the average worker were
jss than their monthly household expenses.^® For the most part,
le Korean Government held to its policy of maintaining a supply
f cheap labor by keeping labor unions docile, resorting to authori-
irian measures, and obtaining the cooperation of employers. In
)77, the president of Hyundai Motor Co. told an American report-
r that the Government had asked him not to increase wages
gnificantly. His and other companies worked with the Govern-
lent in this area.***

Demonstrations and strikes for higher wages and better working
)nditions led to legislation in the 1970's which restricted collective
:tion by urban labor. In 1970, the Korean Government enacted
iws prohibiting strikes and severely limiting unionization and
)llective bargaining in factories in which there was foreign invest-
lent. In 1972, the Yushin reforms granted the Government addi-
bnal controls over the activities of urban labor. Today the only
rikes which are legal are those sanctioned by the Korean Govern-
ent. Collective bargaining is also severely restricted.^*
When these measures and the Government's control of labor
lions were not sufficient to suppress the demands of workers, the
jgime resorted to intimidation and even violence. One of the most
jcent occasions occured in June 1978. The Urban Industrial Mis-
on of the Christian Church had been seeking higher wages for
omen working in textile factories. Their demands were met with
irrests, sporadic violence, and heavy Government pressure." ^^
At the same time, in the 1970's the Government did take steps to
iprove the working conditions of the urban worker, as it had with
le agricultural sector. For example, the Government instituted
le Factory Saemaul Movement. This program was set up to re-
ive differences which arise between employers and employees
id to improve working conditions, increase employee benefits, and
improve company relations with its surrounding neighborhood.^^
hile urban wages remain low, working conditions and employee
jnefits did improve substantially in the 1970's.

meral economic slowdown — 1972

By the 1970's, Korea was facing many of the problems associated
iith rapid economic growth. Real growth during the period from

j* Sumiya, Mikio, "Growth Economy and Unstable Society: Mechanism of the South Korea
],Dnomy," Sept. 19-20, 1977, p. 25.

'*Hapdong News Agency, Korea Annual, 1976, p. 169; Don Long, "Repression and Develop-
1' nt in the Periphery: South Korea" in Bulletin of Concerned Asian Scholars, April-June, 1977,
1 26-35 and 37-41.

« "South Korea's Powerful Economic Offensive," Business Week (Aug. 1, 1977), p. 42.

' LinT, Ki Top, "Development of Korean Labor Law and Practice, Journal of Korean Affairs,
1 25-42. The related legislation is: Special Measure Act on Labor Union and Labor Dispute
i;tlement of Foreign Invested Enterprises, law No. 2192, promulgated, Jan. 1, 1970, and the
Ibor Dispute Settlement Act, law No. 1327, promulgated .-.pr. 17, 1963, and amended m 1963,
:'3. and 1974.

» Chapman, William, "South Korea Clamps Down on Effort To Boost Wages," Washmgton
ht, June7, 1978. ,, ,_, ^

' "The Factory Saemaul Movement, Improved Welfare of Workers Eyed, Korea Herald, June
U978.

186

1965 to 1969 had averaged 10.7 percent per annum, with a rate of
15 percent in 1969. However, by 1970, external debt had reached i
$2.5 billion, making debt management a serious issue. Although
domestic savings increased at an average rate of 36 percent perj
year, this was sufficient to finance only about half the total invest- 1
ments. The remainder had to be financed with foreign capital.** |

Of more immediate concern was the stabilization program, which \
had been ignored as the Government expanded the money supply j
and domestic credit in order to gain public support for the 1969
referendum to amend the Korean Constitution. »* The Government '
had been aware of the potentially adverse economic consequences
of that political decision. Following the election, changes were'
made in the management of its economic ministries, and a new '
stabilization program was initiated for 1970.** As part of this pro- ■
gram, commercial banks were required to eliminate shortages in !
their reserve requirements with the Bank of Korea. Efforts to i
collect overdue loans were accelerated. The money supply was^
tightened and strict controls were placed on borrowing money from i
abroad to cover domestic expenditures.®^ By the spring of 1971, the j
Government declared its policies a success. The Deputy Prime Min- i
ister coined a new word to describe the Korean economic scene: ;
"pros-tability," a combination of prosperity and stability. :

The AID mission was less sanguine, commenting that: |

[I]t should be noted the ongoing battle against inflation is by no means won. The !
annual inflation rate is still higher than desirable to assure the long-term growth in
Korea's domestic savings which is ultimately the key to Korea's economic indepen- :
dence. Some ground has yet to be covered to provide a truly solid basis for future j
DPM's to claim pros-tability for Korea.** j

The balance of payments problems ■

The mission's report on Korea's stabilization program had barely
reached Washington when it became apparent that political consid- ]
erations had again entered the economic equation, this time in ,
conjunction with the 1971 Presidential campaign. As reported from c
Seoul:

Last month * * * a moderately optimistic, if skeptical, report on the financial
stabilization program for the first quarter of 1971 observed that the ROKG seemed
to be keeping the monetary situation under control despite the approaching presi-
dential election. In April came the last weeks of the campaign and the election
itself. Also in April the cherry trees blossomed in much of Korea— and so did
monetary levels."

There was a massive increase in the circulation of money, 8.4
percent for the month, accompanied by a smaller increase in do-
mestic credit. The situation was further complicated by the upcom-
ing May National Assembly election, which limited the Govern-
ment's ability to correct the monetary imbalance. ^^^ AID revised its
analysis of the ROK balance of payments performance for 1970 and
concluded the situation was "disappointing but predictable." Exter-
nal debt reached $2.9 billion. The debt service ratio reached a

•* "Korean Economic Performance Prospects" in Thomas F. Olmsted Chron. File— 1971, Janu-
ary 1971, AID.
»" See "Part B: Review of Korean-American Relations," p. 13.
-Seoul A-140, Apr. 12, 1971.
•» Seoul A-414, Oct. 7, 1970.
•• Seoul A-140, Apr. 12, 1971.
••Seoul A-191, May 24, 1971.
'•• Ibid.

187

angerous 33 percent. The mission recommended devaluation of
he won to insure Korea's meeting payment obligations. ^°*

The International Monetary Fund (IMF) was also concerned
bout the Korean economy. In June, an IMF delegation conducted

mid-year review of ROK policies as provided in the IMF's 1971
tandby agreement with Korea. ^<>2 While the Government agreed to
equests to tighten credit, limit Government spending, and reduce
xport subsidies, it would not agree to devalue the won to 450 to
he dollar, as proposed by the IMF. ^°3

By the end of September 1971, the AID mission was estimating
hat Korea's trade deficit might reach $1.3 billion and predicted
hat the country was headed for a balance of payments crisis as a
esult of excessive imports and a failure to approach its export
argets.^®* These monetary problems were put into the broader
erspective of Korean economic growth in the mission's end of the
ear reports. The reports noted that while the trade gap had in-
reased sharply, other factors, including increased won sales to the
Inited Nations forces in Korea, increased U.S. grant assistance in
le pipeline from previous years, and drawdowns of gold and for-
ign exchange reserves, reduced the adverse impact of the trade
ap somewhat. The mission believed that Korea was capable of
olstering its trade position if the Government was willing to un-
ertake appropriate policies for the exchange rate, tariffs, and
xports. These policies were opposed by "special interest groups,"
owever.^®*

Furthermore, the mission pointed out that Korea's foreign ex-
liange problems should not obscure the economy's basic prosperity
nd future prospects. Korea's rate of growth for 1971 had been 11
ercent compared to 9 percent in 1970. The Government had imple-
lented policies of monetary restraint early in the year, which,
^hile possibly causing some businesses difficulty in the short term,
^ould be beneficial in the medium and long run.^^

Request for U.S. assistance

By January 1972, the Government had become sufficiently con-
Brned with the immediate balance of pajonents situation that it
egan contacting the United States, Japan, and other nations about
nancial assistance. In addition, it put out feelers regarding a
rogram loan from the World Bank.^o' Further, Lee Jae Sul, Vice
linister of the Economic Planning Board, contacted AID Mission
director Adler with a proposal for a long-term credit of $100 mil-

"» Seoul A-177, May 12, 1971. . ^ ,

'»* IMF standby agreements are arrangements which provide a member country with advance
Burance that for a specified period of time— normally 12 months— financial assistance to a
•ecified amount will be forthcoming without review by the IMF, provided the criteria of the
n-eement are observed. Apart from their intrinsic value, standby agreements are considered an
dicafion that a country's economic policies are sound; they are useful in obtaining loans from
mmercial banks. , , t»»t^ u

'"Seoul 3827, June 30, 1971. Korea's refusal to devalue raised fears that the IMF would
tspend the 1971 standby agreement and the Embassy recommended quiet mediation by the
nbassy and Washington. The agreement was not suspended. . „ , , x- ..

"'»♦ Memorandum from Thomas F. Olmsted to Michael Adler, "Economic Problems for the
ext Few Months," Sept. 28, 1971, in Thomas F. Olmsted Chron File— 1971, AID.
""Seoul A-403, Dec. 3, 1971.
'"•Seoul, 7704, Dec. 23, 1971.
'"^SeoulOSll, Jan. 26, 19.2.

188 1

lion from the United States to finance current imports of commo(
ities and services from the United States. *"«

The problem, according to the ROK Government, was a tempn
rary foreign exchange shortfall resulting from external forces, ii
eluding an unexpected slowdown of export demand due to th
general stagnation in world trade volume following "the Nixo
measure"; the rate of decrease of invisible receipts from the UN
forces stationed in Korea and ROK forces in Vietnam; and a
increase in import and loan repajrment costs due to revaluation (
major international currencies, particularly the yen.**^

Within the U.S. Government, there was concern over the impac;
of these external events. Some experts, however, asserted ths
Korea's excessive dependence on foreign capital and foreign pn
duction inputs were even more fundamental to the balance (
payments problem and that the payments problem was a factor i
an emerging, general slowdown of the Korean economy."®

U.S. reaction to the Korean request

The mission's reaction to the ROK request was generally sympj
thetic. It viewed the slowdown as temporary, primarily the resulj
of tight credit policies in the past. It acknowledged that the Unite
States had pressed the Koreans severely with the textile issue*
and the programs of the new economic policy and that Korea wa
being squeezed by the foreign exchange floor set by the IMF. Th'
mission pointed to Japan, Korea's major trading partner, as th
major contributor to the trade deficit and suggested Japanese f
nancing be used to help meet the problem.

In Washington, however, reaction to the request was mixec
USDA was receptive to an additional sale of Public Law 480 whea
and corn, but the AID Food for Peace office pointed out that th
request could not be met logistically. 0MB wanted any additions
assistance for fiscal year 1972 to count against commitments fo
future years. The Export-Import Bank could offer only short-ten
commodity financing, but was prepared to finance medium-terr
equipment packages. AID felt constrained in providing develoi
ment loan assistance because of the pending AID appropriation
bm."=*

At the same time, U.S. officials regarded the Korean request a
an important stage in Korea's financial history: For the first tim
since the beginning of the economy's rapid growth, the Goverr
ment was expressing concern about its balance of payments pos)
tion and seeking international help."^ It was an ideal opportunit;
for the U.S. Government "to assist the Korean Government h
adopting politically unpopular but necessary economic reforms." *'

The U.S. Government considered greater IMF participation i]
Korean economic matters, particularly in stabilization, to be ver

'»• It was requested that the credit take the form of $50 million of additional Public Law 4i
and/or new development loans; $25 million in additional program loans; and a $25 millio
commodity credit from the Export-Import Bank. See appendix C-88.

»**• Memorandum from Lee Jae Sul to Michael Adler, undated, see appendix C-88.

»« Seoul to AID A-081, Mar. 3, 1972; Seoul to AID A-102, Mar. 17, 1972.

"'See "1971 Textile Agreement" in this section, pp. 191-196.

"* Information memorandum for the Assistant Administrator, Asia Bureau, AID, from Che
ter S. Bell, Jr., subject: Korean request for $100 million, Feb. 7, 1972.

"» AID memorandum from Cleo Shook to D. G. MacDonald, Mar. 9, 1972.

"♦AID draft memorandum, subject: Korean balance of payments, PPC/PDA/TP: K Jay, Mar. 1

189

■' mportant, consistent with the recently adopted U.S. policy of using
nternational organizations to a greater extent in international

^ economic assistance programs. U.S. Government officials discussed
Korea's economic situation with the IMF and outlined a plan

^ vhich they felt Korea should be prepared to present before further

? inancial assistance would be forthcoming. "=^ Washington also in-
ormed the Government that the United States would consider

• atisfying its request for additional Public Law 480 and develop-
aent loan funding, provided that the Government consult with
MF to review in depth their international financial situation to

• trengthen the balance of payments; agree that the additional
; ;'ublic Law 480 or Development Loan funds are to be charged

gainst existing U.S. AID commitments to Korea for future years;

nd submit more complete presentation based in part on results of

MF review, demonstrating that additional U.S. assistance is re-

uired."«

1 1 In the latter part of March, the Government responded positively

jlp the U.S. proposals. The EPB revised upward its projected foreign

Jjxchange needs for the period 1972 to 1974, estimating that Korea

?70uld need $500 million more than projected for the Third Five-

i'ear Plan; $200 million for 1972; $200 million for 1973; and $100

, .iiillion for 1974. At the same time, the Government undertook

- measures to improve its balance of payinents situation, including

mport restrictions and gradual devaluation of the won. However,

concessions were made to business interests, including reductions

1 tax collections relative to GNP and increasing the availability of

)w-interest loans. These steps hindered the Government's ef-

orts."'

I After reviewing these measures, the mission concluded that lack

. f additional credit would require Korea to restrict imports sub-

tantially, which would result in a significant reduction in project-

. d GNP growth. It recommended that the United States provide

. le $100 million in additional credit."®

On March 27, 28, and 29, Vice Minister Lee consulted with the

MF in Washington. Among other things, the IMF stressed that

lere could be no significant progress in Korea's balance-of-pay-

jients problem without changes in the foreign exchange rate and

. bandonment of export subsidies and import restrictions. Vice Min-

;ter Lee responded that for political reasons, his Government

Duld not devalue."^

Vice Minister Lee and other Korean officials then met with
reasury. State, and AID officials in Washington on March 30 and
1 and reviewed the various policy measures undertaken by Korea.
r.S. officials advised Lee that the measures were considered inad-
quate for correcting Korea's fundamental, long-term problems. ^*«

: '» State 040723, Mar. 9, 1972.
I "• Ibid.

'"Seoul to AID A-102, Mar. 17, 1972.
"•Ibid.

"• State 054220, Mar. 30, 1972.

'*» State 058872, Apr. 6, 1972. In particular, U.S. officials emphasized that insolvent industries,
lused by political favoritism in earlier years, represented a major problem. They stressed that
reign banks looked closely at the prevalence of favoritism toward basically unsound compa-
es. Lee acknowledged the problem and indicated that President Park had directed that these
•mpanies be "rationalized" in the near future through a process of changing prmcipal inves-
rs and mergers where appropriate.

190

At the same time, U.S. officials expressed approval of the Korean
IMF consultations and said that the United States hoped to make
available an additional $25 million in Public Law 480 assistance in
fiscal year 1972 ^^^ (the United States had already approved $150
million in Public Law 480 for 1972). However, this amount would
come from the existing 5-year commitment. Further, the president
of the Export-Import Bank had met with President Park and com-
mitted "unlimited funds for Korean projects that could meet the
Bank's criteria." "^

Further ROK response: The August emergency measures

Despite improvements in Korea's balance of payments by mid
1972, the general economic slowdown continued, and there was'
little evidence of vigorous recovery. Prices continued to increase,'
domestic producers suffered from the high costs of materials andl
weak demand, profits declined, business debt mounted, and private
domestic investment dropped significantly. As a result. President]
Park issued a presidential decree on August 3, 1972, setting forth
"emergency economic reforms" intended to ease the pressure of
costs on private business, restore economic confidence, and break
the inflationary psychology built into economy. j.

As part of these reforms, the Government established a 50 billion |
won (approximately $125 million) "Industrial Rationalization!
Fund" to modernize equipment, encourage mergers, and improve
the financial structure of priority industries. It was an attempt to
correct the serious, politically generated problem of "irrational j
industries." ^" Other measures were intended to cause a shift in
funds from the curb market (the noninstitutional lending market)
into banking institutions and to increase domestic savings. The
Government also devalued the won, limited its own spending, and
increased tax incentives for investment of domestic resources.

These measures, combined with strong export demand, stimulat-j
ed business activity in the last quarter of 1972, as the business?
community increasingly became aware that the Government in-
tended to adhere to price and exchange rate stabilization policies.
By 1973, Korea's recovery was complete, with the economy experi-
encing a growth rate of 16.5 percent.

These events showed that the U.S. role in the Korean economy j
in the early 1970's went significantly beyond AID programs and
projects. The U.S. Government had served as the principal source
of foreign exchange. Vice Minister Lee's request in January 1972
for $100 million in long-term credits represented one-half the Gov-
ernment's projected 1972 foreign exchange shortfall. Moreover, thisj
amount would be in addition to the $179 million in Public Law 480;
already pending (Public Law 480 in excess of $29 million was,
agreed to in December 1971, and Public Law 480 of $150 million, j
also stemming from earlier Korean requests, was agreed to inj
February 1972. In fact, the U.S. Government programed over $200ij
million in Public Law 480 under agreements signed in 1972). |

The U.S. Government also played an instrumental role in the]
formulation of Korean economic policy. It conditioned considera-i

'" State 058872, Apr. 6, 1972.

'" Memorandum of Meeting, EPB Vice Minister Lee and Party, AID, Mar. 31, 1972.

'"See footnote 120, previous page.

191

on of additional Public Law 480 and development loan funding on
onsultations by Korea with the IMF in order to develop economic
olicy measures to strengthen the economy. The U.S. recognized
lat these measures were politically unpopular but accepted the
3sponsibility of ''assisting the ROKG" in adopting them. In addi-
on, it assumed the role of mediator between the IMF and the
overnment at a time when their differences in economic philos-
phy threatened to disrupt what the United States considered to be
necessary relationship for Korea's economic well-being.
The presidential decree of emergency economic measures in
ugust 1972 reflected the degree of U.S. influence. They were
insistent with U.S. recommendations for actions considered neces-
iry for Korea's long-term economic growth and represented a
gnificant departure from the previous ROK policies.
171 textile agreement

The Korean Government blamed the 1971 foreign exchange
lortfall on ''external forces." Vice Minister Lee Jae Sul of the
PB pointed specifically to "[the] Nixon measure [which] entailed
orldwide trade and currency difficulties. "^^^ He was referring to
resident Nixon's August 15, 1971 new economic policy, which

ansformed the international monetary system by suspending the
mvertibility of dollars to gold and served notice to the world that
le U.S. was prepared to use protectionist policies, in this instance
1 import surcharge, to deal with the adverse consequences of
icreasing world trade. The New Economic Policy was not directed
)ecifically at Korea, but it had significant impact there. Curtail-
lent of a free trade system, particularly with the United States,
ould restrict Korea's economic growth, since its economy depend-
1 heavily on foreign trade.

A specific and more severe protectionist threat was U.S. insist-
ice that Korea limit exports of woolen and synthetic textiles to
le United States, its largest export market. In 1971, textiles were
16 cornerstone of the Korean economy, comprising by far the
.rgest share of exports. They accounted for over 35 percent of the
>reign exchange earned, growing from $173 million in 1968 to $432
lillion in 1971.

In the United States, synthetic and woolen textile imports from
ast Asian countries had become an economic and hence a political
sue. Economically, according to a former White House official
ivolved in the textile negotiations, the increasing level of imports
as having a negative impact on the domestic textile industry and
Tiployment. The employment problem was particularly trouble-
)me, as the industry employed primarily low skill workers in
nail towns where there were few alternative sources of employ-
lent. Politically, the issue had arisen during the 1968 presidential
impaign, with the industry eliciting promises of assistance from
Dth candidates. Following the election, the Nixon administration
It substantial protectionist pressure over textile imports from a
"oad spectrum in Congress.

During the spring of 1971, textile exports from East Asia in-
'eased dramatically, causing further political repercussions in the

'" Memorandum from Lee Jae Sul to Michael Adler, undated, see appendix C-88.

192

United States. As the 1972 election approached, successful resolu
tion of the import problem became a key element of President
Nixon's ''Southern Strategy," since southern textile producers were:
among the strongest proponents of restrictions on imports. i

As early as 1969, the White House had tried to defuse the issue!
and avoid protectionist legislation by obtaining voluntary agree-
ments from major exporters. ^^'^ In 1971, Nixon appointed Ambassavjjj
dor-at-large David Kennedy to be special negotiator. Kennedy
agreed to the assignment, despite his own free trade philosophy, on
the condition that he have complete control of the negotiations and
be allowed to deal directly with Nixon.

At the outset, Kennedy shifted the negotiations, which had fo-
cused in 1969 and 1970 almost exlusively on Japan, to all four Far
Eastern textile exporters, including Korea. Kennedy assembled a
team which excluded the Departments of State and Commerce, asi
State was considered excessively sympathetic to the interests of
foreign countries and Commerce excessively sympathetic to the
U.S. domestic textile industry.

In May 1971, Ambassador Kennedy visited all four countries,;
meeting directly with the chief of state in each. In Korea, the
initial conversation with President Park went smoothly. It was
agreed that Kennedy would deal directly with Park and Lee Nak'
Sun, the Minister of Commerce and Industry, and that they would
be the only ones with decisionmaking power. Agreement was also;
reached on a June date for the beginning of substantive discus- j
sions. Kennedy planned to have Anthony Jurich, his senior staff
person, run the discussions, while staying in the background him-^
self, to intervene as necessary politically.^^®

Prior to the meeting in June, an intersigency task force repre-
senting NSC, AID, 0MB, and USDA met to discuss using compen-
sation for reduced imports as a negotiating tool with Korea. In-
creases in Public Law 480, development loans, and military aid;
were discussed as alternatives. It was decided that 0MB would'
recommend to the President, along with other possibilities, that
Public Law 480 sales over a 5-year period be increased up to $200
million above the amounts previously contemplated. ^^^

The negotiations began as scheduled on June 14, 1971. According
to Jurich, the negotiating team initially opposed using compensa-
tion as a tactic. However, during the negotiations, it learned that
Korea had projected a doubling of its textile exports in less than 4
years. The team concluded that obtaining an agreement without^
compensation would be extremely difficult and inequitable as well. ,

The first round of substantive negotiations ended on June 20
when it became clear that no further progress could be made. The
U.S. team had offered limits on synthetic textile growth of 10
percent, 9 percent, 7 percent, 7 percent, and 7 percent over a 5-year
period beginning April 1, 1971. A 1 percent annual growth rate was

'" Earlier efforts to obtain textile agreements, in 1969 by Commerce Secretary Maurice Stans ;
and in 1970 by Peter Flanigan, Special Adviser to the President, were unsuccessful. Japan was
the primary focus of both efforts.

"•Memorandum from Thomas Olmsted to the Ambassador, May 10, 1971, in Thomas F.
Olmsted Chron File— 1971, AID.

'•^ Memorandum from Genersd Sales Manager to Assistant Secretary for International Affairs
and Commodity Programs, U.S. Department of Agriculture, June 14, 1971.

193

roposed for wool exports, considered less important. ^^^ The Kore-
is countered with an offer of a straight 20 percent per year
icrease in textile growth. The United States also offered a com-
3nsatory package of $50 million in Export-Import Bank loans, $50
lillion in extra development loans, $225 million (net) in extra
ublic Law 480, and an additional $225 million in investment
larantees. The total was roughly $600 million and considerably
DOve Korea's estimated export "loss." ^^g Since no agreement could
3 reached, it was decided that negotiations would resume on July

In the latter part of June, Ambassador Kennedy had a message
slivered to Deputy Prime Minister Kim Hang Nyul. It stated that
16 U.S. offer of incremental assistance, which was still in effect,
as contingent on ROK acceptance of the U.S. textile proposal and
iinveyed Ambassador Kennedy's disappointment at the Koreans'
^laying tactics. Further, the U.S. Government would view nega-
vely any attempt to raise the subject in the upcoming meetings
ith Vice President Agnew or Secretary Laird. ^=*°
On July 1, 1971, Rex Beach, Ambassador Kennedy's special as-
istant, returned to Korea and reached agreement with the Minis-
ly of Commerce and Industry that foreign exchange losses over
le 5-year period would be in the range of $300-$350 million."*
'lough reaction was still negative, chief Korean negotiator Shin
I formed the AID Mission that the Koreans were willing to resume
jgotiations on July 27. However, he reiterated that the starting
)int would have to be a 20 percent growth rate per annum.
At the same time, the United States learned that President Park
id been urged not to accept the U.S. proposals and that the
oreans were unprepared to renew meaningful negotiations. There
as substantial opposition among the industry people who were at
e center of the DRP power structure and whose political power
i uld not be underestimated. These people felt they would be hurt
lidly by the proposed restrictions. U.S. officials believed that these
iople would not be hurt as much as they thought, but that it was
:ore important what they thought than whether that was really
I'ue. Certain U.S. officials also thought the opposition was strong
uough as to jeopardize the Government. ^^^

Following a trip to Seoul to obtain further background on the
Jtuation, Jurich requested that the embassy inform the. Korean
Government that the United States reluctantly accepted July 27 as
I'e date for resumption of the talks, but would not put forward
aother growth rate or compensatory assistance offer. The Korean
Jsponse was generally negative, indicating there was little pros-
];ct for success, particularly since President Park himself had set
1 e growth rate of 20 percent per year.*^^

Only days before resuming discussions, the entire negotiating
]ocess reached a complete impasse. As explained by various mem-

" Memorandum to the file, Thomas Olmsted, "Kennedy Negotiations," Aug. 6, 1971, m
' omas F. Olmsted Chron File— 1971, AID.

*» Memorandum from Thomas Olmsted to the Ambassador, "Kennedy Mission Negotiations,
.:y 9, 1971. in Thomas F. Olmsted Chron File— 1971, AID.

»°Ibid.

.^' Ibid.

'" Memorandum for the record, Thomas Olmsted, "Subject: Mr. Jurich's Visit to Seoul, July
: 18, and 19th," 1971; July 19, 1971 in Thomas F. Olmsted Chron File— 1971, AID.

" Memorandum to the file from Thomas Olmsted, Aug. 6, 1971, op cit.

194

bers of the American negotiating team, the Koreans said the)
would not proceed until the Japanese moved first. Taiwan anc
Hong Kong set similar preconditions. The Japanese, however
would not come to an agreement until one of the other three
countries did so. Japan finally said it could not conclude an agree
ment at all because of political problems and upcoming elections
The negotiators returned to the United States.

As a result of the impasse, members of the negotiating team helc|
intense meetings with representatives of the American textile in
dustry to discuss the next step. The industry was in an uproai
because the four countries were exporting as many textiles as
possible before any limitation was set.

At the same time. President Nixon's enunciation of the new
economic policy on August 15, 1971 provided a clear message to the
East Asian countries that the U.S. was prepared to take strong
actions to protect itself from adverse repercussions in international
trade.

The final round of negotiations began in mid-September when'
Jurich and other members of the negotiating team were dispatched
to East Asia, while a delegation from Hong Kong met with negotia-
tors in the United States. The negotiators informed the representa-
tives of the four countries that the United States expected agree-
ments to be reached by October 15. The possibility of unilateral i
action by the United States was raised with all four countries. At a
press conference on October 12, 1971, President Nixon was asked
whether the United States would set mandatory quotas if textile
agreements were not reached. President Nixon responded that the
United States would move unilaterally.*^*

The President's response made a strong impact in East Asia. By
this time, an agreement had been reached with Taiwan and negoti-
ations had shifted to Japan. Recognizing that a Japanese- American
agreement was imminent, Korea sent a representative to Japan to
negotiate as well. On October 15, agreements were reached with
Japan, Korea, and Hong Kong.

Among the key provisions of the Korean agreement were:
(DA term of 5 years, beginning October 1, 1971;

(2) An average growth rate for synthetics over the 5-year
period not to exceed 7.5 percent, with the first year's growth
not to exceed 10 percent;

(3) Five percent carryovers allowable;

(4) If specific levels within categories of textiles could not be
agreed to, Korea was required to accept the level set by the
United States.

The United States also agreed to $100 million in development
loans through fiscal year 1975, in addition to commitments already
made, and to an increased annual level of Public Law 480 totaling
$275 million over 5 years beginning 1971. A formal agreement with
modified terms was signed on January 4, 1912.^^^

According to the U.S. negotiators, of the four countries entering
into quota agreements, Korea was the most severely threatened.

•"President's news conference of Oct. 12, 1971 in Public Papers of the Presidents, Richard i
Nixon, 1971, No. 328, p. 1036.

'" $35 million per year in additional commodities and $20 million a year to be generated by
reductions in local currencies, to be provided to the United States under Public Law 480
agreements; see appendixes C-87 and C-89 respectively for full text of agreements.

195

Japan and Hong Kong, and to a lesser extent Taiwan, all had
nature textile industries which had grown rapidly in earlier years,
md further rapid growth was not anticipated. Korea, on the other
land, was still in the process of rapid growth. Ambassador Kenne-
iy noted that in conversations with President Park, he had tried to
ninimize the disruptive aspect of any future agreements. Kennedy
;uggested that as a result of any agreement, Korea could reduce its
osses by upgrading the quality of its exports and would need less
capital to build new plants and repair old plants. As it turned out,
his argument proved correct. It has been suggested that Korea
)enefited from the agreement, especially when Public Law 480 and
levelopment loan assistance were taken into account, and, further,
hat the agreement forced Korea to diversify its export markets, to
ts subsequent advantage."*

President Park, however, had refused to accept Kennedy's argu-
nent. Park asserted that a special relationship existed between the
wo countries. He brought up his country's assistance in Vietnam
ind other points and suggested that the United States was using
he textile negotiations as an excuse to break the friendship be-
ween the two countries.

In an effort to counter the push for an agreement, Korea had
ought support from other elements in the U.S. Government.
)uring the negotiations, ROK officials cited the comments of visit-
ng Congressmen in opposition to a textile agreement. At one point,
he team was informed that the Korean Government was stalling
'n order to raise the issue with Vice President Agnew on his visit
0 Korea. Though the negotiators had warned the Government not
0 do so, they were concerned enough to dispatch Rex Beach to
Vashington to brief Agnew. When Korea did raise the issue,
\gnew deferred to Kennedy.

According to the negotiators, the situation was made worse by
he attitude and actions of certain State Department officials who
ictively supported the Korean Government (and other govern-
nents), thereby reinforcing the ROK's unrealistic expectations that
he United States would give up if resistance was strong enough. A
ligh-level State Department official at one point had informed the
Corean Ambassador in Washington that President Nixon did not
upport the negotiations fully and urged further resistance. Other
nformation was leaked to the Koreans by State Department offi-
lials.i"

It was these perceptions — the special relationship, the magnitude
•f the economic threat, and the belief that the negotiations could
►e thwarted— that made the Koreans, according to negotiators, the
oughest to deal with. Unlike the other countries, the Koreans had
efused to budge until the pressure against them became too great,
^hen suddenly their resistance collapsed.

The negotiators had used a variety of techniques. In addition to
he "carrot" of Public Law 480 and development loans, the negotia-
ors attempted to use a "stick"— the Congress and its protectionist
entiment (both in general and toward textile imports) and the

'** Subcommittee staff interviews.
"" Subcommittee staff interviews.

196

effect that unsuccessful negotiations would have on appropri-
ations.^^®

In' retrospect, the emphasis on the inability of the executive
branch to control congressional actions paralleled the position
which the U.S. Government had previously asserted with respect to
the modernization plan."® To the Koreans, exports ranked second
only to the issue of security. Undoubtedly, the negotiations rein-
forced Korea's belief of the need to increase its influence with
Congress and the American people.

The negotiations had concluded with a threat of U.S. power. The
United States was able, and appeared willing, to limit Korean
textile imports unilaterally. The Koreans could do nothing but
agree voluntarily to limit exports.

The issues underlying the textile negotiations were complex. The
political considerations of President Nixon's southern strategy un-
questionably played a role. However, serious economic consider-
ations motivated U.S. actions as well. The textile agreement also
raised the issue of free trade, which continues to rage.

Ironically, the textile dispute was due in part to the success of
Korean-American cooperation in the 1960's. AID and the ROK
Government had actively promoted the growth of labor-intensive
industries such as textiles. The United States had loaned funds for
industrial development and had backed Korea's export policy. That
Korean textile exports could affect U.S. industries was a sign of the
success of American and Korean economic effects and represented
a new aspect to their economic relations. On the other hand, the
conduct of the negotiations — with Korea's intransigence and the
U.S.'s assertion of power — indicated that diplomatically, at least,
the two countries' relations had not reached a concomitant level of
development.

The oil crisis— 1974-75

On March 27 and 28, 1974, the Consultative Group on Develop- ;
ment Assistance to the Republic of Korea^*° reviewed Korea's eco-
nomic performance in 1973, its prospects for 1974, and its plans for
the following decade. It noted the remarkable recovery in 1973
from the 1971-72 slowdown and the greatly improved outlook for a
sustained high rate of growth. However, in the short run Korea
was seen as one of the countries most severely to be affected by the
quadrupling of oil prices in October 1973 because of its dependence
on imported energy sources from the Middle East and its strategy
of exporting manufactured goods rather than primary products. •
The group also expressed concern about Korea's current and
future balance of payments. However, it concluded by supporting
Korea's growth policy and agreeing that Korea deserved the sup- ;
port of capital exporting countries and international organiza-
tions.^*^

By July 1974, the group's prognosis proved correct. Industrial
production, after an initial pause in December 1973 and an expan-

"• Subcommittee staff interviews.

'" See "Part C-I. Security and Political Affairs," pp. 69-71.

■*" The Consultative Group on Development AsJsistance to the Republic of Korea consists of U
countries, including the United States and Japan, and five international organizations, includ-
ing the IMF and the World Bank.

"♦' OECD 07708, Mar. 28, 1974.

197

sion through February of approximately 20 percent above the pre-
vious quarter, declined 8 percent through May. In May alone, the
decline was 4 percent. Further, the Seoul consumer price index
rose more than 16 percent over basically the same period. Initially
the GNP increased, reflecting the 1973 boom, but then it too began
to level off. Increased oil prices and weakening demand in interna-
tional markets produced a significant deterioration in the balance
of payments and once again necessitated heavy reliance on exter-
nal financing. ^*2

In response to those conditions, the Government took what the
/^erican Embassy described at the time as ''[the] calculated risk
)f stimulating domestic demand on the assumption that export
lemand will strengthen by the end of the year." The Embassy
loted that ROK policies were adopted "to avoid business difficul-
:ies and unemployment at the risk of aggravating inflation and
balance of payments."^"

By the end of 1974, the calculated risk had not worked and, in
:he face of continued weak demand worldwide for its exports, the
government announced in December its ''Special Measures for Im-
Drovement of Balance of Payments and Business Recovery." Its
nain feature was a devaluation of the exchange rate from 400 to
180 won to the U.S. dollar. Again, however, the policies were
iesigned to stimulate the economy, continuing the calculated risk.

U.S. evaluation and recommendation

[ The Embassy reviewed the Korean economic situation in detail
n April 1975, concluding that the Government's need for securing
foreign exchange to finance its huge balance of payments deficit of
)ver $2 billion continued to be the prime economic problem. During
he first quarter of 1975, Korea had financed its balance of pay-
nents gap principally through short-term bank borrowing, with
let foreign assets dropping to minus $623 million. During the same
)eriod, import refinancing by commercial banks, mostly United
States, rose to $986 million, exceeding gross revenues for the first
ime. These and other factors led to speculation that Korea's for-
eign exchange credits might be approaching available limits. The
ilmbassy suggested that "the calculated risk would have to be
eassessed in light of conflicting pressure to avoid unemployment
ind reduce imports for domestic consumption." It noted that the
Government was talking about fiscal and monetary restraint, but
hat political considerations were impeding implementation of nec-
essary policies.^**

The Embassy estimated that the balance of payments deficit
vould narrow progressively in the latter part of 1975, but noted
hat foreign exchange problems would continue for the next 6
nonths and that funding sources were limited. In light of this
inalysis, the Embassy made the following recommendation regard-
ng assistance (similar to earlier recommendations):

As much [Public Law] 480 as soon as possible in [fiscal year] 1976; early approvals
f pending EX-IM loan applications, to help maintain investor lender confidence;
upport of Korean requests for IMF credits; $1 billion in long- and short-term credits
a past [sic] 15 months, to see Korea through what appears to be remaining limited

"» Seoul 04528 (1), July 12, 1974; Seoul 04616 (1) July 16, 1974.
'« Seoul 04528 (2), July 12, 1974. '
'** Seoul 2528 (2), Apr. 15, 1975.

198

period of FX [foreign exchange] difficulties; consideration of possible USG guaran-
tees for commercial and bank borrowing by hard-hit middle economies such as
Korea; and possible approaches to Middle East lenders re loans to Korea. In addi-
tion the consultative group meeting, scheduled for July 1-13 in Paris, should be
used to examine appropriateness of Korea economic policies in light of prevailing
conditions and outlook."'

Later that month, the Korean Government undertook a series of
measures to improve the balance of payments situation, including
a prohibition against won bank loans for purchases of imports,
higher import deposits, and increased import incentives. In a dra-
matic move, the Government announced that Prime Minister Kim
Jong Pil would visit Saudi Arabia's King Khalid within the month
to follow up on earlier talks regarding cash loans, deferred oil
payments, construction projects, and technical assistance.

Despite these efforts, others in the U.S. Government were nei-
ther as sympathetic in their judgment of Korean policies nor as
generous in their recommendations for assistance as were Embassy
officials. In May 1975, a representative of the Treasury Department
visited Korea, reviewed the economic situation, and made a report
which concluded:

Korean economic policy in the past six months can only be characterized as
irresponsible * * * To choose to expand rather than cut back in a time of rising
balance-of-payments deficit with low reserves and short-term credit already heavily
utilized is an extremely chancy operation. The economic leadership knows the risks
and is clearly worried ♦ ♦ ♦ obviously under great political pressure to maintain
growth and employment so as not to aggravate an already tense political situation.

Bilateral Assistance. The United States has resumed shipment under its PL 480
"commitment" • * * The basic issue is when does Korea "graduate" from the
highly concessional terms on which U.S. assistance has normally been extended. It
has a per capita GNP of over $500. Actually, a [development loan] phase-out would
have occurred five years ago when income was half this level * * * but did not
because of the textile issue. In view of the post- Vietnam situation and Korea's
balance-of-payments situation, there is a great temptation to "help." Even though
the amounts would not be large in relation to needs,, nothing could be more perni-
cious. It would place, in effect, U.S. support behind the wrong kind of policy now
being pursued and weaken the influence of the IMF just at the point when it is in a
position to provide enough assistance to exert some influence on policy."*

The Treasury representative also looked at U.S. assistance in a
broader context — that of multilateral assistance. He suggested that
U.S. aid again be used as a lever to establish, in conjunction with
IMF's consideration of an extended drawing fund, a more vigorous!
stabilization policy.

Korea's request for additional U.S. assistance

On the day that the Treasury report was submitted to the Em-
bassy, the ROK Government appealed to Washington for additional
assistance. On June 20, Deputy Prime Minister Nam Duck-Woo
followed this request with a similar one to Ambassador Sneider,
who reacted immediately and favorably. In a cable that day to AID
Administrator Parker and Assistant Secretary of State Habib,
Sneider stated:

As you know, it has not been our intention to recommend additional development ^
lending beyond that originally programmed for FY 1975. Proposed Public Law 480
levels for FY 1976 will provide significant assistance of a balance of payments \
nature. However, we believe an economic and developmental justification can be
made for quick disbursement type development lending in support of rural develop-

'" Ibid.

'♦• Korea trip report, May 23, 1975, pp. 15-18; see appendix C-91.

199

nent in FY 1976. Such lending would be most useful in influencing a more forth-
:oming attitude on the part of the Japanese and possibly other donors toward
issistance for Korea. It would clearly serve broader U.S. interests by providing both
angible and symbolic evidence of our continued concern and support for Korea's
jconomic and social growth and development, as well as their defense capabilities."^

With Korea's economy in an uncertain state, the Eighth Meeting
)f the Korea Consultative Group was held on July 1-2, 1975. There
vas a general consensus that the balance of payments difficulties
vould continue until recessions eased in Korea's major export mar-
kets—the United States and Japan — and that tight monetary and
iscal policies combined with foreign borrowing would be necessary
0 avoid undue social and economic disruption. While the World
3ank generally was sympathetic to Korea's situation and re-
;ponses, both the IMF and Japan were more critical. The United
States was also critical of policies "that in effect financed produc-
ion in excess of demand by foreign borrowing." However, the
Jnited States did concur with the World Bank that Korea needed
lubstantial assistance and expressed gratification at the response
)f the World Bank and IMF to Korea's needs. ^"

As for future assistance, Assistant Minister for Planning Suh
loted that Korea had loans of $2.2 billion in the pipeline at the end
>f 1974, but needed at least $600 million in new commitments.

The participants, while not pledging specific amounts, indicated
hey would provide future assistance:

Japan stated the 1975 assistance would be about $78 million for
pecific projects;

World Bank noted that $335 million in assistance was planned
or fiscal year 1976;

The IMF noted that further drawings from its oil facility depend-
d on resources to be raised from OPEC and others;

The U.S. noted its recent plan for $150 million for Public Law
80 in fiscal year 1976, consideration of $30 million for housing
nvestment guarantees, and continued access to Ex-Im loans. ^*^

In subsequent months, Korea's economic situation improved con-
iderably. Exports rebounded during the second half of 1975, easing
he unemployment and underemployment of the previous year.
Jumper grain crops also contributed to GNP growth. At the same
ime, the confidence of American bankers recovered from post-
/ietnam fears, and increases in outstanding lines of credit were
.Tanted. By early 1976, the Korean Government, the IMF, and the
Jnited States generally agreed that Korea had weathered the
iftermath of the oil price increase remarkably well. The Korean
jovernment itself remained sufficiently concerned, however, to
nake balance of payments and inflation the top priorities for the
'ear.^*°

The U.S. role during the oil crisis and its aftermath was not as
>ervasive as the problems of the earlier '70s. The United States did
lot condition its assistance on policy changes, nor was it the larg-
st supplier of foreign lending. Nevertheless, U.S. support was

'" State 04477, June 20. 1975.

'♦•OECD P17307. The U.S. position was consistent with embassy recommendations that the
United States avoid stressing the seriousness of Korea's short-term foreign exchange position,
hich might reduce investor confidence and adversely affect Korea's financing possibilities.
Seoul 3738, May 27, 1975).

•♦•OECDP17307.

"•Seoul 01801, Mar. 11, 1976.

200 I

important, both economically and psychologically. The $150 millior
in Public Law 480 for fiscal year 1976 was long-term, low-interesi
assistance. It helped Korea to minimize foreign exchange problems
in future years. Psychologically, the continuance of U.S. economic!]
and military assistance provided moral support for Korea's efforts!
to obtain the huge amounts of external financing it needed at a
time when additional financing was becoming extremely difficult tc
find. Without this support, Japan and other donors, already appre-
hensive about Korea's future, were less likely to contribute tc
Korea's needs. U.S. support also strengthened the confidence oi
commercial lenders and investors, by the mid-1970's critical sources
of foreign exchange.

Korean-American trade

Throughout the I970's, one of the dominant features of Korean-
American economic relations was the continued growth of bilateral
trade. While declining in relative terms, both Korean exports to
the United States and Korean imports from the United States grew
in absolute value, with the United States maintaining its position
as the single largest market for Korea's exports and the second
largest source of Korea's imports: ^"

[Dollars in millions]

Korean exports to Percent of Korea's imports Percent of \

United States overall exports from United States overall imports

1970 $395.2 47 $584.8 30

1971 531.8 50 678.3 28

1972 759.0 47 674.2 26

1973 1,021.2 32 1,201.9 28

1974 1,492.2 34 1,701.5 25

1975 1,459.9 30 1,851.4 26 ]

1976 2,492.6 32 1,962.9 22 '

1977 3,118.6 32 2,447.4 23 [

Source: Department of Treasury.

In contrast to its active role in providing assistance, the U.S.
Government traditionally had not played a major part in Korean-
American trade except with regard to textiles. Most Government
incentives for exports to Korea came from the Export-Import Bank,
which representatives explained, treated Korea no differently than
other countries. With the growth of Korea's economy, opportunities
for U.S. exporters improved and Ex-Im coverage increased, as can
be seen in the chart below.

•" An official of the Department of Commerce explained that the predominance of U.S.
exports to Korea during earlier years largely resulted from the tying of U.S. assistance to the
purchase of U.S. products. As U.S. assistance declined in relation to Korea's overall GNP, thej
relative position of U.S. exports to Korea declined as well.

201

[Dollars in millions]

I ^ . Disbursements Shipments '

^t >^scal year to Korea to Korea Total

1970

.971

.972

.973

974

975

976

976 transition quarter
977

7.4

2.6

MO.l

11.2

1.3

12.5

6.2

9.3

15.5

24.9

26.8

51.7

54.0

69.4

123.4

98.5

79.9

178.4

66.9

64.6

131.5

14.4

21.4

35.9

68.1

96.6

164.7

1 Funds committed to transactions as insurance or guarantees, but not disbursed.
2 Columns may not total due to rounding.
'Transition quarter, July-September, fiscal year 1976.

Source: Export-Import Bank.

The Bank's loans covered only a small portion of overall Korean
exports to the United States and constituted only a small percent-
ige of its own worldwide business.

In the 1970's, the growth of bilateral trade resulted in greater
nvolvement by the U.S. Government in trade issues. In particular,
he U.S. Government focused on liberalizing Korea's restrictive
mport policy. On the other hand, the United States, in response to
ompetition with American industries by Korean industries, sought
0 impose its own restrictions on Korean imports. It did, however,
ncourage a large number of noncompetitive imports from develop-
ng countries by initiating a duty-free system, from which Korea
benefited greatly.

U.S. efforts to liberalize Korea 's import policy

Korea's import policy had been of interest to the U.S. Govern-
lent throughout the 1960's, as the United States sought to rationa-
Lze Korea's import restrictions. While the United States wanted
Corea to remove a number of items from its import list, Korea's
alance of payments situation was such that the United States did
ot consider it appropriate to press for trade liberalization.

By the 1970's, however, Korea's economic growth made its
uport restrictions more costly to the United States, and at the
ame time made trade liberalization economically feasible. In June
973, the Embassy in Seoul reviewed the Korean import regime
nd its implications for the United States, noting that the high
ariff levels appeared to be a significant deterrent to U.S. exports,
s was the impressive array of nontariff barriers. The Embassy
oncluded that these restrictive policies had an adverse impact on

wide range of exports to Korea. "* The Korean Government,
ware of this U.S. concern, had been actively encouraging its busi-
essmen to buy American. ^=^^

The problems created by the oil price increase prevented more
ctive efforts by the United States during 1974 and 1975. In 1976,
Korea's economic performance made new initiatives acceptable,
nd during 1977 and 1978 the United States pressed for further
beralization. The Korean Government also showed greater inter-

'" Seoul A-192, June 11, 1973.
•»»Seoul3395, May 29. 1973.

202

est in liberalizing trade in order to counteract the overly rapi<]
increase in Korea's foreign exchange reserves, hold down domestij
prices, and show its trading partners that it was willing to open it;
markets as circumstances permitted. The Government establishe(i
plans to reduce its tariff rate to 25 percent. Since 1977, the Govern|
ment eased import restrictions on groups of items and eliminatecj
restrictions on others.^" Recent estimates by the U.S. Embass:
indicate that Korea's trade deficit for 1978 will increase by nearb;
$1 billion as a result of recent trade liberalization measures."]
In general, U.S. Government officials considered Korea's effortij
encouraging, but believed that greater liberalization was desirable
from both U.S. and Korean perspectives. In particular, they note(i
that many nontariff barriers to imports remained. However, with
the major focus of U.S. and Korean trade concerns on the multilat ;
eral trade negotiations being conducted in Geneva, the Unitec
States was not seriously pressing the Korean Government furtheii
on the issue. "^

U.S. restrictions on Korean exports |

The United States also periodically undertook actions to restrici
Korean exports to this country. The most significant of these was
the 1971 textile agreement, discussed earlier. In 1977, the Unitec
States sought to limit Korean exports of non-rubber footwear ancj
mushrooms under section 201 of the Trade Act of 1974, which
provides relief from import competition causing or threatening tc
cause serious injury to a domestic U.S. industry. Imports of footj
wear from a number of countries had been of concern to the U.S
footwear industry for 10 years. In 1977, imports almost equaled
total domestic production (368 million pairs vs. 391 million pairs)
Taiwan, not Korea, was the major exporter, although in 1977
Korean exports accounted for over 30 percent of total U.S. imports.
In February 1977, the International Trade Commission (ITC) found
that footwear imports were a substantial cause of serious injury tci
domestic industry, and as a result the President ordered the Spe-
cial Representative for Trade Negotiations to negotiate marketing
agreements with Taiwan and Korea. In June 1977, a system ol
graduated quotas was agreed to, cutting back exports of footwear to
the United States from both countries.

In June 1977, the ITC also recommended that relief be provided
from imports of mushrooms to the United States. Again, Taiwan,:
not Korea, was the principal exporter, although in 1976 Korea 1
accounted for just under 30 percent of total imports. The President i
rejected the ITC recommendation as not being in the national!
economic interest and instead sought and received assurances fromf
Taiwan and Korea that their exports would not disrupt U.S. mar-l
kets. No quantitative limits were set."^ j

These examples of U.S. protectionism deeply concerned Korea,!
which viewed them as part of a worldwide pattern threatening its I
economic growth. In response to the ITC's initial recommendation]
that tariff quotas be imposed on footwear (which was rejected by
the President), a Government-owned newspaper, the English-lan-

'" Subcommittee staff interviews.

'" Seoul A-148, Sept. 6, 1978.

"" Subcommittee staff interviews.

'" The above information came from subcommittee staff interviews.

203

uage Korea Herald, indicated that footwear was the first of many
Korean products which would eventually face restriction in the
J.S. market. The Korea Herald, along with the Korea Times, also
eported that the Korean and other affected Governments were
lanning to undertake diplomatic efforts against the recommenda-
lon.

Korea's concern was not unwarranted. The U.S. Embassy esti-
lated that Korea's worldwide exports had been reduced in 1976 by
400 million as a result of overseas trade restrictions, with losses
-om U.S. restrictions estimated to be over $78 million. The decline
as projected to be even greater in 1977. The Embassy referred to
-ade protectionism "without question, as the main bone of conten-
on between Korea and its overseas trading partners." ^**

Generalized system of preferences

While the United States was seeking to limit Korea's exports of
jrtain items, in 1976 it established a "Generalized System of Pref-
-ences" (GSP) for U.S. imports from developing countries, from
hich Korea benefited greatly. The GSP allows eligible developing
)untries to export close to 3,000 items to the United States duty-
ee.^" In 1977, Korea exported items valued at over $531 million
ity-free, out of total U.S. imports for those items from all coun-
ies of $4.65 billion.

Developing countries, including Korea, could themselves choose
» be eligible for GSP, which Korea did. Some trade specialists
ave suggested, however, that Korea and a small number of other
)untries should not receive this preference because of their rela-
vely high stage of development. In particular, Korea and Taiwan
)minated the import market for many specific items, at the ex-
mse of other less developed countries. Others argued, on the
her hand, that the less developed countries would not be able to
)mpete with Korea in any event and that there were no guide-
nes for complete removal of any country from the GSP. Further,
ley considered as inequitable the removal of countries from the
SP list prior to the 5-year review period mandated by the statute.
t present, no efforts are being made to rescind Korea's eligibil-

MILITARY ASSISTANCE IN THE 1970'S

Military assistance in the 1970's was substantial and, as in the
)60's, was closely tied to economic assistance. It was also impor-
nt in another way. As one expert noted, "Security on the penin-
ila is absolutely fundamental to investor confidence." ^^^ In the
)70's, several U.S. and Korean programs were implemented which
ere designed to enhance Korea's security. Despite some disap-
)intment on the part of Korea over the 1971 U.S. Modernization
an -and a change from grant military assistance to credit sales,
vestor confidence was not diminished.^" The Korean economy

"Seoul A-206, Dec. 5, 1977.

*• Countries can be removed on a temporary basis if they export more than 50 percent of the

al amount of imports or more than an absolute dollar value (presently $33.4 million) of any

gle item.

•• Office of Special Representative for Trade N^otiations.

*' Subcommittee staff interviews.

" KI-6.

204

was able to withstand the decline in U.S. grant military assistanc
and the switch to loans, and the Korean Government successful!;
increased its own defense expenditures, without jeopardizini
Korea's economic growth. ^^^

A number of difficult issues did raise, however, in the 1970's ii
connection with military assistance. The Koreans believed that th«
$1.5 billion Modernization Plan would be provided largely in th(
form of grants and would be completed in 1975. In both these
assumptions they were mistaken. The program was not completecj
until 1977, due to Congress failure to appropriate the full amounts'
requested by the Defense Department. Further, beginning in 1975
the United States switched much of its assistance to the foreigi.
military sales (FMS) program, a cash and credit program. 0ml
result of the delay was that the United States phased out oper
ations and maintenance support substantially more quickly thai
planned, in order to concentrate on the provision of new equip
ment.*** Another result was that the ROK Government realizec
that, whatever the Defense Department wanted to give, congres
sional attitudes made the prospects for full appropriations uncer
tain. This uncertainty on the part of the ROK Government was 2
primary impetus behind Korean efforts to influence Congress. "•'
The Koreans also worried that these program changes might indil
cate a decline in the U.S. commitment to Korea's security. I

In 1971, despite the continuing presence of two ROK divisions ill
Vietnam, the United States also resumed the MAP Transfer Pro^
gram,^^* and Korea became responsible for materials totaling $21(
million from 1971 through 1975. The United States helped Kores' ?J
absorb this extra cost by increasing the Public Law 480 program bj
$125 million over 5 years. In 1971, $20 million of this was allocated
specifically for military budget support. After 1971, because Publicl'
Law 480 had been amended to preclude use of funds for purposes»fl
other than economic development, the procedures for providing the
offset had to be changed. As the AID Mission Director explained to
Korea's Deputy Prime Minister, Public Law 480 funds would have
to be allocated for economic development, but that would freej
Korean resources for use in the national defense budget. ^®^ Theitj
total Public Law 480 offset provided from 1971 through 1975 wasj [jj
$125 million. Thus, the MAP Transfer Program cost Korea only
$85 million for the period. The General Accounting Office found
that "Public Law 480 proceeds are intentionally being used as
indirect military budget support" in contravention of congressional
direction. ^«»

According to the Brown Memorandum, compensation was to be
provided for Korean troops in Vietnam as long as Korea had at

>" Ibid. p. 59.

••^ KI-6.

'"See "Part C: I. Security and Political Affairs," (pp. 67-71).

'•"•Op. cit., GAO, "Supplement to the Report on U.S. Assistance ' ' *," 1973, p. 2.

•" Ibid., p. 30.

>"' The changes in 1966 in the Public Law 480 legislation prohibited "country uses" of Public J
Law 480 for military budget support. The "U.S. uses" portion was not subject to that prohibi-|
tion. However, the "U.S. uses" portion was designed to provide a small fund of currency for
official use in Korea. As GAO noted, "Some Members of Congress have expressed their concern I
over the use of Public Law 480 program proceeds for military budget support. For example, it is
still permissible to use U.S.-uses funds for direct military budget support, but the Senate j
Ck)mmittee on Foreign Relations has proposed further amending Public Law 480 to prohibit such i
agreements unless each agreement is specifically authorized by legislation." Op. cit, GAO.j
"Supplement to the Report on U.S. Assistance * ' '," p. 4. ^

205

ast two divisions there, which was until 1973. However, in 1971,
ongress voted to cut off certain of the payments. In 1973, the U.s!
overnment arranged for ''close-out payments" which in effect
jmpensated Korea for about $170 million in expenses incurred in
le prior 2-year period.**®

Concern about the strength of the U.S. commitment led to Presi-

mt Park's decision to institute the 5-year, $5 billion force im-

-ovement program (FIP) in 1975. It was designed to make Korea

ilitarily self-sufficient, provided the United States contributed

lignificant air, naval, and logistical support." *^o Although the

nited States provided substantial FMS credits for the program,

.)0ut $275 million per year, 65 percent of the funding came from

orea's own foreign exchange reserves. In addition. Park levied a

:itional defense tax to support the 28 percent increase in the ROK

(ifense budget from 1975 to 1976.

The defense portion of the Korean GNP rose from about 4 per-
<nt in 1970 to 5.3 percent in 1975 to almost 7 percent in 1977.
!3spite the increased defense burden, Korea's annual GNP growth
] te continued at the high rates of the 1960's (the average rate in
1 e 1970's was over 10 percent) and the economy was clearly strong
(lOugh to support the increase. The foreign exchange losses result-
ig for the reduction of U.S. forces in Korea in 1971, and the end of
le Vietnam earnings in 1973, caused a decline in these receipts
JDm $292 million in 1970 to $63 million in 1976. However, they did
]»t have a strong impact on the economy either. Other receipts,
]imarily from tourism, had increased at the same time and cov-
(ed the difference on the invisible earnings account. Similarly, it
i not anticipated that the troop reductions announced for the
(ming years will have a substantial economic impact because of
( port earnings and total capital inflows.

CONCLUSION

'The dominant feature in Korean-American economic relations
sice 1961 was the successful development of the Korean economy,
^'lich grew at an average annual rate exceeding 9 percent for
larly two decades, among the world's highest growth rates. Ex-
rrts, the catalyst for economic development, went from less than
50 million to over $10 billion during the same period. Other
Eitistical indicators were equally impressive.

A number of factors contributed to this remarkable achievement.
Iremost were the Korean people themselves: Educated, industri-
es, disciplined; they were Korea's greatest natural resource. The
1 )rean Government deserved credit for having placed a priority on
CDnomic growth and directing the economy with firm resolve.

The role of the U.S. Government was significant, too. In the
]60's, economic assistance was the major source of funding for
i iustrialization, and both economic and military assistance freed
brear from a substantial portion of the defense burden. At the
sme time, AID officials were integrally involved in Korea's eco-
imic planning, helping to formulate projects and programs and

•'The closeout agreements totaled $365.3 million, but appear to include prior payments.
S tracting the payments, as reported to the Symington Subcommittee (see chart on p. 176), the
a itional payments totaled about $170 million. Op. cit., GAO, "U.S. Agreements * ' *," p. 13.

° KI-6, Part 2.

206

urging necessary and unpopular institutional reforms. U.S. trai
ing of Korean economic and administrative officials also contribi^
ed to the success. j

As the economy grew in the late 1960's and 1970's, Korea becanj
increasingly independent, and as a natural result, the U.S. roj
diminished in some respects. The U.S. Government itself encouj
aged the transition. Nevertheless, when the turbulent econom
events of the 1970's threatened prosperity, the United States pr|
vided necessary financing and exerted influence with both Konj
and the international community to help Korea surmount its pro|
lems. Important in the actions and reactions of Korea and tlj
international community during these times was the security th;
the U.S. military presence represented.

Korean-American economic relations cannot be understood wit
out looking at the strategic and security concerns of both countrie
Throughout much of the 1960's and 1970's, AID emphasized that i
involvement in Korea's economic development was in support
broader U.S. objectives. Development would ultimately enab
Korea to defend itself, create a solid buffer between Japan and tl
Communist countries of northeast Asia, and free the United Stat<i
from the financial burden of Korea's defense. Development wou^
also foster political stability and internal security supportive (
these goals. Further, an economically strong Korea would pro^
the efficacy of the non-Communist system of development.

The Korean Government viewed economic development in muc
the same way, desiring sufficient economic strength to provide fci
its own defense and free itself from military dependence on tY\
United States. This was particularly so in the late 1960's and earli
1970's, as Koreans perceived a diminution of the U.S. commitmen;
They recognized continued economic growth was crucial to politics .
legitimacy and as a justification for rigid internal controls.

In an ironic sense, the measure of Korea's economic success an
of the American role were the conflicts generated between the t\^
countries. The U.S. position in 1970 to reduce the troop level wr
based in part on a conclusion that the Korean economy coul
support a greater portion of the defense burden. U.S. efforts 1
limit textile exports resulted from the growth of Korea's textiJi
industry and its impact on an important segment of the America j
economy. All nations resist foreign efforts to restrict their export
but Korea's resistance was also a vestige of its prior dependence, £
well as a result of its strong desire for economic self-sufflcienc;!

These events and the Korean reaction to them did much i
determine the nature of Korean- American relations in genera
including the intense efforts by the ROK to influence Congress an
the American people. The U.S. Government itself contributed tj
the initiation of these efforts by failing to recognize that economi
development had outstripped Korea's perception of its own capj
bilities, and by emphasizing that ultimate power over levels (
assistance lay with Congress.

Despite the generally positive nature of Korean- American ec(
nomic relations, there were also some problems. ROK policies i
the 1960's, supported by the U.S. Government, resulted in a sul
stantial portion of Korea's rural population migrating to urba
areas, creating a large labor pool for industrialization. Industrie

207

ages were deliberately kept low to give exports a competitive
dvantage, and organized labor was severely restricted. Throughout
luch of the 1960's and early 1970's, farm prices were also kept low
) eliminate a source of urban discontent, hampering the develop-
lent of rural areas and agriculture. Social welfare in all sectors
igged behind economic development.

By the late 1960's, the U.S. Government had become concerned
Dout the effects of these policies but, unlike its response in rela-
on to policies affecting development and stability, did little to
iter them. This was due in part to a conflict in LF.S. objectives,
ith military and overall economic stability having priority over
)cial welfare and rural development. In fact, the massive infusions
' Public Law 480 assistance, although ostensibly linked to agricul-
iral self-help measures, actually may have served to a degree as a
^incentive to agricultural development. Further, the intent of
ublic Law 480 assistance was further distorted in the 1970's by its
direct use to support military objectives.

In retrospect, it is clear that the productive aspects of Korean-
merican economic relations predominated. The Subcommittee
included that Korea stands as a unique example of the success of
.8. assistance and of the constructive possibilities inherent in
►operation between the United States and developing countries.

SPECIAL ISSUES RELATING TO ECONOMIC RELATIONS

At the beginning of the investigation, the subcommittee heard
legations of questionable and illegal activities in three areas of
orean-American economic relations. Specifically, the allegations
volved manipulation of the Public Law 480 program, particularly
ith respect to rice sales, by American and Korean officials; rig-
ng of U.S. military procurement contracts in Korea; and pay-
ents by U.S. corporations to the Korean Government and its
ficials and agents. Each of these issues received special attention
•^ the subcommittee and are discussed in the following subsec-
Dns.

FOOD FOR PEACE PROGRAM

'The objectives of the Food for Peace Program (Public Law 480)
e:

• * * to expand international trade; to develop and expand export markets for
S. agricultural commodities; to use the abundant agricultural productivity of the
lited States to combat hunger and malnutrition and to encourage economic devel-
< ment in the developing countries, with particular emphasis on assistance to those
untries that are determined to improve their own agricultural production; and to
omote in other ways the foreign policy of the United States.^"

"These objectives are contained in the preamble to the 1954 Agricultural Trade Develop-
: nt and Assistance Act, more commonly known as Food for Peace or Public Law 480. Basic
linger in the law occurred in 1966, 1975, and 1977. The Food for Peace Act of 1966 (Public Law
J-808) substantially amended Public Law 480. Shifts were made to use Public Law 480 to
i prove the U.S. balance of payments situation. The disposal of surplus American agricultural
• nmodities was de-emphasized. In 1975 the International Development and Foreign Assistance
-t (Public Law 94-161) included new criteria for determining Public Law 480 recipients. At
J St 75 percent of title I sales had to go to countries with an annual per capita GNP of $300 or
Is. The 1975 amendments stressed small farmer agricultural development. A 1977 amendment
1 the law raised the minimal per capita GNP to $550. The amendment also linked title I sales
1 re closely to agricultural development and improvement in the quality of life of the recipient
i:ion's poor. Other amendments to the law include: Public Law 90-436 approved July 29, 1968;
;blic Law 91-524 approved November 30, 1970; Public Law 92-42 approved July 1, 1971; and
'■ blic Law 93-86 approved Aug. 10, 1973.

208

Under the authorizing legislation, the Department of Agricultu
has primary control and funding of Public Law 480. An InU
agency Staff Committee (ISC) was established, chaired by Agrici
ture and composed of representatives of the Departments of Stal
Defense, Treasury, the Office of Management and Budget (OMl
and the Agency for International Development (AID)."* The l^
would meet weekly, and each agency would express its views <
Agriculture's decisions regarding Public Law 480 allotments. T]|
ISC was to mold conflicting interests into a required consens
before final approval of assistance.

The State Department regarded Public Law 480 as a foreij^
policy tool, a means of providing general budget support to U.
allies. The Defense Department saw it as a means of supplyii
nations with additional military assistance. AID promoted the u
of Public Law 480 for economic development. 0MB examinii
Public Law 480 allotments in terms of budgetary constraints, whi
Treasury was concerned with the possible inflationary impacts
the program.

Through the first half of the 1960's, Agriculture's objectiv
guided Public Law 480 allocations. Agriculture saw Public Law 41
primarily as a means of establishing markets for U.S. commoditi
and disposing of surplus agricultural products abroad. By the mi
1960's, however, the political and security interests of State ai
Defense and the economic objectives of AID came to domina
allocations. •

During the 1950's and 1960's, the U.S. exported large amounts
Public Law 480 commodities to Korea on a grant or concession
basis. These consisted largely of cotton, wheat, and rice and we
meant to cover deficiencies in Korean production. As producti(
increased in the late 1960's and as the economy developed suf
ciently for Korea to purchase commodities on a commercial bas:'
Public Law 480 was expected to decline. In fact, AID projected i\
end to the need for Public Law 480 by 1971. However, the prograj
was continued beyond that time principally because of facto!
other than food and development needs and despite objections li
the responsible U.S Government agencies. The Department of Agi^
culture favored commercial sales over Public Law 480 assistanc
and AID agreed that Korea was ready to "graduate" to thos
However, the Department of Defense, the White House, certa
Congressman, and Tongsun Park, along with Korean Governmei
officials, kept Public Law 480 assistance levels high in the la
1960's and the 1970's, as can be seen in the following table:

"* The above mentioned agencies were the most active members of the ISC. Other agenc
which are or were members of the ISC at one time or another include; the Department
Commerce, the Office of Economic Planning, and the United States Information Agency. 0th
agencies which occasionally attend the ISC to express their views have been the Natior
Security Council and the Council on International Economic Policy.

209

X , PUBLIC LAW 480 SHIPMENTS TO KOREA BY YEAR

t{ I [In millions of dollars]

:' Year

J 955

: 356

- 357

358

, 359 ;

. 360

; 361

362

)63

364

: )65

166

167

168

369

■ 170

' 171

■ 172

; 173

174

175 :.:"

,176

176 transition quarter

• 177

Title 1

Title II

Total

7.3
9.7

7.3
24.2

14.6

48.3

16.0

64.4

35.2

16.5

51.6

17.0

10.6

27.6

23.9

8.3

32.2

28.7

15.1

43.8

49.0

9.6

58.7

82.4

7.5

89.9

67.9

13.5

81.4

59.2

13.7

72.9

31.9

23.5

55.4

37.9

34.6

72.6

48.6

26.8

75.4

142.5

43.0

185.5

99.1

17.1

116.2

120.1

24.0

144.1

144.5

10.8

155.3

143.6

10.8

154.4

5.7

5.6

11.3

73.9

4.4

78.3

62.8

63.0

74.7

74 7

72.1

Sources: AID, Food for Peace Offices, and U.S. Department of Agriculture.
Note: Totals have been rounded.

tiblic Law 480 and the Defense Department

. Sales of Public Law 480 commodities generated won which the
oreans used for military budget support. In 1966, Congress
.Tiended the Public Law 480 legislation so that, effective 1972,
irrency generated from Public Law 480 sales had to be used for
jonomic development. This precluded their use for military pur-
Dses. Through 1971, however, Korea was able to and used as much
5 80 percent of Public Law 480-generated funds for military pur-
)ses.^"

Even after 1971, Public Law 480 was used indirectly to support
.lilitary assistance by applying it to help Korea offset the costs of
le MAP Transfer Program, reinstituted in 1971. An additional
location of Public Law 480 totaling $125 million was made be-
s^een 1971 and 1975 for this purpose.^^* The intent and net effect
the allocations were to free ROK Government resources for
ational defense purposes. Defense Department requests resulted
I commodity imports judged unnecessary for Korea's economic
jvelopment, circumventing the spirit of the congressional man-
ite."='

'» The amendment to Public Law 480 in 1966 pertained to country-use funds, which was the
al currency generated from the sale of Public Law 480 commodities used by the Korean
vemment. See "Part C-IV Economic Relations," pp. 162-163.

'♦ See pp. 173-174 of this section. ^ . ,

'» From 1971 to 1975 Congress apparently was not aware that Public Law 480 was bemg used
a form of military assistance.

210 J

Public Law 480 and the White House \

Public Law 480 assistance was used by the White House to ga^
Korean acquiescence to the 1971 Textile Agreement. ^^« In th;
year, the U.S. promised Korea $275 million in Public Law 41.
assistance over a S^year period. This was over and above pr
grammed needs and without consideration of development obje
tives or Korea's food needs. Interviews with U.S. officials respond
ble for determining levels of Public Law 480 indicated that th
commitment prevented any objective evaluation of Korea's acta
Public Law 480 needs and preempted their decisionmaking authoi
ty.

Public Law 4S0 and the Korean Government

Public Law 480 assistance facilitated Korea's policy of purcha
ing some domestic grains at artificially low prices. U.S. official
aware of this policy and how Public Law 480 was being used '<
further it, urged the ROK Government in 1969 to alter the graii
purchasing policy and made plans to tie future Public Law 4^
assistance to changes in the pricing policy. It appears that Publ
Law 480, coupled with Korea's grain-pricing policy, was a retardiri
influence on the growth of Korean agriculture in the 1960's.*

Others interested in Public Law 480

Rice appears to have been the only commodity manipulated in
properly, and at times illegally, by American and Korean Goveri
ment officials. Public Law 480 had been of interest to America
rice-growers and their representatives in Congress for a long tiir
because increases in exports helped keep the market price higl

The United States began supplying rice to Korea under Publ
Law 480 in 1968 at the request of the Korean Government. Froi
this date, at least two Congressmen used their positions to indue
Korea to buy large amounts of rice, and in the process usurped tb
prerogatives of AID and Agriculture to determine appropriat
levels. Korean officials used the rice deals for political and persom
aims as well as to subsidize activities designed to influence Amer
can policy toward Korea.

Specifically, former Congressman Richard Hanna and Tongsu]
Park met with Prime Minister Chung II Kwon and KCIA Directc^
Kim Hyung Wook in Seoul in 1968 and agreed to make Park tb:
selling agent for all Public Law 480 rice transactions. The Office (
Supply of the Republic of Korea (OSROK) subsequently sent
letter to the California Rice Growers Association recommendin
that Tongsun Park be used for all rice deals, including commercia
transactions. ^^8 The KCIA was also a beneficiary of Tongsun Park'
rice agency. His diary showed that KCIA Director Kim had bee:

"«See p. 191-196 of this section. \

'" Op. cit., AID, Korea fiscal year 1970 program memorandum, pp. 143, 151; KI-6.
"* House Committee on Standards of Official Conduct, Korean Influence Investigation, part <
Oct. 21, 1977, p. 138. In 1969, Tongsun Park attempted to tie rice exports to Korea to support ft
Korea's military assistance from the United States. Park met with at least one Congressman
discuss support for a $50 million military aid bill and the possibility of Korea's purchase
additional U.S. rice. The bill passed and Korea did purchase additional rice, but there is t
indication that Park's efforts affected the voting on the military aid bill. House Committee c
Standards of Official Conduct, Korean Influence Investigation (hearings yet to be published

211

paid $20,000. The U.S. Embassy, however, received a report that
Kim left Korea with $500,000, most of it from rice commissions.

According to Public Law 480 regulations, any relationship be-
tween the selling agent and the buyer, in this case the Korean
government, was prohibited. The Department of Agriculture, sus-
Decting Park of having ties with Korean Government officials, in
1968 requested information on Park from several agencies of the
executive branch. The agencies replied that they had no ''deroga-
:ory" information about Park, ^8° leading USDA investigators to
conclude in April 1969 that no ties existed between him and the
Korean Government. It is clear, however, that the U.S. intelligence
community was aware by the beginning of 1969 that Park had a
dose relationship with key figures in the Korean Government. The
lubcommittee was unable to discover why this information was not
provided to Agriculture's investigators. Agriculture Department of-
icials said that had this information been provided. Park could not
lave continued as the agent. ^®^

From late 1970 until March 1972, Tongsun Park stopped partici-
bating in rice transactions with Korea. The reason reportedly in-
volved the politics of rice in Korea. Park's mentor, Chung II Kwon,
vas rumored to have lost favor because he had kept several hun-
Ired thousand dollars of the rice commissions he received from
^ark rather than turning them over to the Democratic Republican
^arty as was customary. Anti-Tongsun Park factions in the Blue
louse wanted to designate someone else as selling agent to assure
he proper flow of U.S. funds into the party coffers. In addition,
J.S. Ambassador Porter made representations to high-level Korean
ifficials, primarily Prime Minister Chung II Kwon, concerning
ome of Tongsun Park's activities. Porter did not complain about
'ark's role as a selling agent, but about his involvement with
-lembers of Congress, pointing out that Park's activities were
larmful to Korean-American relations. Porter also wrote Washing-
on suggesting Park be "recalled". ^®=^ Porter's representations and
issatisfaction in Korea with the distribution of rice commissions
3d to Tongsun Park's temporary removal as a selling agent in late
970 and in 1971.

Former Representative Otto Passman used his position as chair-
lan of the Subcommittee on Foreign Operations of the Committee
n Appropriations to push rice exports to Korea more vigorously
ban any other Congressman. Neither American nor Korean offi-
ials appeared willing to resist Passman. AID was reluctant be-
ause Passman could, and did, hold up foreign aid bills in his
ubcommittee when his wishes were ignored. Korean leaders de-
Brred to him because of his threats to delay the military assistance
ppropriations for Korea.

In 1970, Korea intended to purchase some 400,000 tons of rice
rom Japan, but later that year, decided to buy from the United
tates instead. By the time of the Korean request, the Agriculture
)epartment had established allocations for the year and no more

'**' "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
itional Organizations of the Committee on International Relations, 95th Cong., 2d sess., part 4,
ar. 15, 16, 21, 22; April 11, 20; and June 20, 1978 (hereafter referred to as "KI-4"), p. 565.
""Ibid., pp. 132-139. . „

'"See "Part C-III: Executive Branch Awareness of Questionable Korean Activities , pp.
;8-129.

35-508 O - 78 - 15

212

funds could be obligated for Korea under Public Law 480. However,
Agriculture eventually allocated money to finance 200,000 tons o
rice and AID decided to use a development loan to underwrite th<
other 200,000 tons. Beneath the surface. Passman had engineerec
the rice agreement with Korea and arranged the way the rial
would be financed. AID and Agriculture merely implemented Pass J
man's plan. In a 1971 issue of the Rice Journal, Passman himsel
explained, in remarkably candid terms, how he sold 400,000 tons o
rice to Korea:

I approached the President of Korea on this basis: We are aUies, and while we ar
assisting your country, you are in turn assisting our country to help maintaii
freedom for the free people of the world— so we are in this struggle together. Also,
had messages from President Nixon and Secretary of Defense Laird. This informs
tion was so very pleasing to the President that I gathered sufficient courage t
approach him with our rice proposition. I told President Park that in our countr
we had a very large surplus of rice, whereas in his country he had a very largl
deficit. He was going to purchase a substantial amount of rice, either from Asia o;
from other countries. Now, inasmuch as it would be touch-and-go back in Congresi
as to whether or not we could legislate what had been proposed by Mr. Laird ii'
updating the Korean military establishment, we would need the majority support o
the 78 members of Congress from rice producing States, or we'd never be able to ge
this supplemental through. Therefore, we wanted the President to have anothe)'
look at our proposition. As he had not yet made a firm commitment to bni
Japanese rice, we wanted him to look at what we had to offer. The presiden'
immediately responded by saving that we had been fair about our approach on thi
matter, so Korea would purchase 400,000 tons of U.S. rice, providing that we couh 1
better Japanese terms. I answered him that I was with the legislative branch of thrj
Government, and could not say we would better Japanese terms, but could equa
them; and our terms would be firm. The President replied that, on that basis, w([
had his permission to issue a press release stating Korea would purchase 400,00(
tons of U.S. rice.

Well, of course, upon my return it was up to me to arrange financing. Upoi
investigation, I learned that the Department of Agriculture had already turne«^
thumbs down on financing Public Law 480 rice sales to Korea. So it was necessarj'
for me to take this directly to the top level of the executive branch * * *. The Whit<
House agreed with me and passed the word to the appropriate people to proceed or
the basis of our agreement.

So the Director of the Budget raised the Public Law 480 ceiling to finance 200,00(
tons of the rice. Then I worked out an agreement with Dr. Hannah, Administratoj
of the Agency for International Development, so that AID would finance the bal*
ance of 200,000 tons under the Development Loan Fund. All I needed then was i
letter from Dr. Hannah, have him contact the White House, and the White Hous«
contact the Department of Agriculture. So Dr. Hannah gave me the letter stating
that it had been agreed from the White House on down to finance the 400,000 toni
of rice for Korea. I might add this, that I recognized we had a surplus of rice in th(
South and California, I thought there should be a proper division between the
amount we could sell from the two areas. When the Government made the alloca
tion, and started making deliveries, it was found that the southern portion waf^
16,000 tons short of the regional allocation agreed to. The Government wanted tdfi
switch the 16,000 tons to California. I vetoed that — I said no. We were going to hole
it just like we agreed to.

* * * On my part, it was a question of using my position and seniority in tht
Congress to see that the agreement was carried out."'

Passman again negotiated the rice allotment for 1972. It waS|,
agreed between the Korean Government and Passman that Korea '
would purchase a total of 800,000 tons from the United States—
600,000 under Public Law 480, 133,000 under an AID development
loan, and the remaining 67,000 tons to be purchased with Korean
foreign exchange. AID complained that Passman's manner of pro-
viding the 800,000 tons of rice caused problems for AID and for the
Korean Government. Passman's proposal required a development

'" "Interview with Otto Passman," Rice Journal, September 1971, pp. 3-4.

213

;oan of $24 million rather than the $17 million under the AID
proposal, and would have left AID with insufficient funds for other
ievelopment loan projects. Further, Passman's proposal required
^orea to spend its scarce foreign exchange to purchase rice. An
\ID memo pointed out:

The IMF, the U.S., and others have been advising the Koreans against spending
iny more foreign exchange. This proposed deal further aggravates Korea's reserves
tosition and places the U.S. in the uncomfortable position of causing the Koreans to
0 against the sound economic advice of the IMF and ourselves.

The memo concluded, however, that ''despite the above problems,
t appears that we may have to go along with this means of
jroviding rice to Korea. "^»* AID later informed Passman that it
vould go along with his proposals.

' USDA's role of determining Public Law 480 assistance levels had
teen preempted by Passman's proposal and AID's concurrence.
JSDA notified AID that ''they [USDA] had completed a worldwide
leview of U.S. rice supply and demand and that they had conclud-
d that only 700,000 tons of Public Law 480 and DL-financed rice
hould be provided to Korea this year."^^^ Commenting on the
JSDA position, AID officials admitted that the Koreans would
robably live with Agriculture's decision since "the ROKG suggest-
d that they might not require as much rice as they earlier had
hought."^««

In a draft letter for Agriculture Secretary Butz to send to AID
administrator Hannah, Agriculture voiced its reservations about
JD's actions to "accommodate the wishes of Congressman Otto E.
*assman. ♦ * * There appears to be some question as to whether
lorea actually needs to import 800,000 tons of U.S. rice during
alendar year 1972 * * * and we cannot help but feel that your
ommitment to Congressman Passman has pre-empted our respon-
ibilities."^*^ The letter was never sent to AID. As a result of a
hone conversation between Hannah and Butz, a substitute letter
^as forwarded which simply agreed to finance 700,000 tons of rice
nder Public Law 480, as arranged by Passman. ^®®

On March 21, 1972, the Office of Supply of the Republic of Korea
)SROK) wrote to major American rice exporters that Tongsun
ark again would be required as a selling agent for all rice transac-
ons with Korea. '«» By this time, Chung II Kwon had regained
ivor in the Blue House and Tongsun Park had overcome opposi-
on by having Members of Congress write flattering letters about
im to President Park. In 1972, KCIA Director Lee Hu Rak rees-
iblished KCIA control over the rice agency. The U.S. Government
3ceived reports that with the KCIA short of funds following the
}71 election in Seoul, Lee had intervened to supervise the rice
urchases and was instrumental in having Park reinstated as a
filing agent.

When Agriculture became aware of the 1972 OSROK letter, it
istituted its second investigation of ties between Park and Korean

'" Memorandum from Cleo F. Shook to Willard H. Meinecke, Dec. 3, 1971.

'" Memorandum from Willard H. Meinecke to Dr. John Hannah, Administrator, AID, Dec. 30,

71.

'- Ibid.

'" Draft letter from Earl L. Butz to Dr. John A. Hannah, January 1972, unsigned.

'••Korean Influence Investigation, Part 2, Apr. 3, 4, 5, 10, and 11, 1978, hearings before the

•mmittee on Standards of Official Conduct, p. 461.

•••KI-4, p. 561.

214

Government officials. As a result of meetings among Agriculturt]
officials, Tongsun Park, and Korean Government representatives
Park withdrew himself as a selling agent. Despite the fact tha
Park had withdrawn, he continued to receive rice commissions. Ii
1972, under pressure from S. K. Kim and Lee Hu Rak, the presi
dent of Daihan Nongsan Co. made his firm's Washington ban!
account available to Park to facilitate the receipt of commissions
The Embassy learned that from $1.7 to $2 million in rice commis
sions were to be channeled to the KCIA.

Manipulation of the Public Law 480 rice program continuec
through 1976. Using Daihan Nongsan, Park received commissions
from Public Law 480 and commercial rice transactions with Korej
until that year.^^° Passman, sometimes in cooperation with Park
actively pressured Korean officials to purchase more rice than thej
needed and maneuvered AID and USDA officials to carry out hii
arrangements in these same years. *^^

Conclusions and recommendations 't'

In the 1960's, the Public Law 480 program contributed to th(
development of the Korean economy by filling food needs anc
supplying the ROK Government with some of the resources re
quired to maintain the large defense establishment. During thit
period, the agriculture sector did not grow as rapidly as did indus
tries, largely because the Government did not channel resources^
into farming. Public Law 480 appeared to have held down rates oj
agricultural growth, productivity, and incomes until the earljs
1970's when the rural sector was given more attention.

The Public Law 480 program involved one of the most publicized!
aspects of the Korean scandal — the rice dealings of Tongsun Park.
Congressman Otto Passman, and Congressman Richard Hanna. li
is important to note, however, that it was Passman, not Park, whc
most severely manipulated the Public Law 480 program by pressur-
ing both Korean and U.S. Government officials to increase rice
transactions; that Tongsun Park's activities had relatively littk;
impact on the levels of Public Law 480 assistance provided; and
that a number of U.S. Government officials were aware of TongsunJ
Park's relationship with the ROK Government, but never informed
the Department of Agriculture. Furthermore, the Public Law 480
program itself easily led to abuse because of ambiguous, contradict
tory goals and ill-defined agency responsibilities. Further, abuse is
always possible when such massive amounts of assistance are avail-
able.

By the late 1960's, the Agriculture Department and AID conclud-
ed that Korea was sufficiently developed that they could wind
down Public Law 480 concessional sales and shift to commercial
sales. Several factors, however, intervened in the late 1960's and
early 1970's to maintain high levels of Public Law 480 assistance
for Korea: The Defense Department's desire for continued support
for the Korean defense budget; the White House's desire to restrict'

'•o Korean Influence Investigation, Part 1, Oct. 19, 20, and 21, 1977, Hearings before the
Committee on Standards of Official Conduct, pp. 346-347.

'•' Seoul 00219, Jan. 10, 1976; memorandum from Michael H. B. Adler to the Deputy Adminis-
trator, Jan. 15, 1976; indictment. United States of America v. Otto E. Passman, filed in U.S.
Court for the District of Columbia, Mar. 31, 1978, No. 78-00159.

215

bxtile imports from Korea; the Korean Government's desire to
old down the price of rice paid by politically restive workers;
Congressmen Passman and Hanna's desire to sell their States'
arplus rice; and the desire for rice commissions on the part of
ongsun Park, Chung II Kwon, Kim Hyung Wook, the Democratic
:epublican Party, and the KCIA for its activities in the United
tates.
Based on the above findings, the subcommittee recommends:

(1) That better channels of communications be established
between the investigative units of the Department of Agricul-
ture and the Agency for International Development and the
U.S. intelligence and law enforcement agencies with regard to
information developed by those latter agencies relating to pos-
sible violations of statutes and regulations administered by the
Agency for International Development and the Department of
Agriculture.

(2) That Congress grant to the Auditor General of the
Agency for International Development the subpena power
given to the Inspectors General of other agencies under the
Inspectors General Act of 1978.

MILITARY PROCUREMENT PROBLEMS IN KOREA

In early discussions with various sources, the subcommittee
3ard allegations of price-fixing and rigging of U.S. military pro-
irement contracts in Korea as a result of the ROK Government's
3sire to acquire foreign exchange. In general, it was alleged that
;rtain quasi-official Korean agencies obtained U.S. Government
)st estimates beforehand and were able to assure that no contrac-
•r bid lower than those estimates. Further, those agencies deter-
ined in advance who would get the contract and assured that no
her competitor bid lower than the selected party. It was also said
lat the U.S. Government was unable for a long time to prevent
iich collusion.

Some of these allegations arose from a press release by Senator
'illiam Proxmire on October 27, 1976, which included findings of
.8 own staff investigation. It listed charges of collusion, price-
xing, and intimidation.

In its own investigation of these and other allegations, members

■ the subcommittee staff traveled to Korea in December 1977 and

terviewed a number of U.S. Government employees there. They

so talked to Americans who were former procurement officials,

igineers, economic counselors, and legal and security officials in

orea. The staff studied special procurement program reviews of

e Department of the Army Materiel Development and Readiness

ommand,^^^ correspondence between the Department of the Army,

id Senator William Proxmire; U.S. Army Criminal Investigation

;,ivision (CID) reports; and other records. It interviewed, as well,

iime'Korean residents of the United States who had knowledge of

e procurement problems facing U.S. Government authorities in

""Procurement Management Review," U.S. Army, Pacific, June 1976 (heremafter PMR),
1 idy Report; Improved Procedures for Procurement in Support of U.S. Forces, Korea, Noyem-
I - 1976 (hereinafter Study Report); and Special Study Group Memo to General Vessey, CINC

^C/USFK EUSA, Jan. 27, 1977, subject: Improvement of Procurement Operations in Support of

'FK (hereinafter DRCPP-R). The Army Materiel and Readiness Command is known as

.RCOM.

216

Korea. The subcommittee was unable to arrange interviews witl
Korean contractors or Government officials in Korea. '^

The purpose of the investigation was to determine the truth oj
the allegations, the real nature of the problem, the extent to whicli
the-ROK Government cooperated in finding a solution, and wheth;
er the U.S. military was able to surmount the difficulties. |

U.S. procurement system |

In the earlier occupation of Korea after World War II, almost alf
U.S. Government logistic needs had been supplied from outside th<|
country. During the Korean war, U.S. forces were only partialb
dependent upon local sources for support. In the late 1950's am
early 1960's, however, use of Korean vendors and contractor
became more necessary, simply from the standpoint of cost. Fur
ther, as the Korean economy grew in sophistication, a greatei
diversity of goods and services became available. In the earb!
1960's, the authority for U.S. Government procurement in Korei
was vested in the U.S. Korean Procurement Agency (KPA), a unii
subordinate to the U.S. Eighth Army.^'^

A document important in the course of procurement in Kore£
was the Brown Memorandum of March 1966, which elaborated the
terms for compensation to Korea for the deployment of Korear
troops to Vietnam. One provision called for increased procuremem
of Korean goods and services for use by U.S. forces not only iri
Korea itself, but also in Vietnam. ^^^

In 1966, the United States and Korea also signed the Status o]
Forces Agreement (SOFA).^®^ A passage in article XVI of the Agree
ment addresses the matter of U.S. military procurement of good^
and services in Korea:

The United States may contract for any materials, supplies, equipment and servj
ices (including construction work) to be furnished or undertaken by the Republic o:i
Korea for purposes of, or authorized by, this Agreement, without restriction as U
choice of contractor, supplier, or person who provides such services.***

A former KPA official described to subcommittee staff the stand^
ard procedure followed by the U.S. Korean Procurement Agency
(KPA) for soliciting bids and awarding contracts. All proposed proji
ects were first sent to a U.S. estimator or engineer for designsj
drawings, and an Independent Government Cost Estimate (IGCE);
This was required on all contracts expected to cost $10,000 or more/
The information was then forwarded with a purchase request and s
commitment of funds to either the KPA or to the Far East District
of Engineers. ^*^

The KPA then drew up a bidders list for each procurement,
which was given in turn to a contract officer. All names for the list
were provided by the Korean Ministry of Commerce and Industry

'"' Additional information on the KPA is available in PMR, pp. 2ff op. cit. Before KPA wai
established, USFK were supported by separate base procurement offices throughout Korea

>9*For the text of the Brown memorandum, see appendix C-86. See pp. 165, 169, 172-176ffi
for a discussion of the relationship of military assistance to economic aid.

>•» The following quote is from the 4th Edition of the SOFA, January 1973.

'•• As quoted in PMR, p. 9, op. cit.

•"^ The FEDE was also involved in procurement, especially on larger contracts (over $100,000)
In addition to the FEDE, the Korean Regional Exchange also awarded contracts in Korea, bul
relatively few in comparison with the KPA. This report deals mainly with the KPA, inasmuch
as most of the contracts in Korea involved that organization and because the problems of tht
KPA were typical of those encountered by all.

ill

217

VICI). Requests for proposals, which detailed precisely what was
eeded, were then sent to 10 or so contractors. Most of this KPA
rocess was to be kept secret.

The contractors were given a number of weeks to prepare bids,
hich were to be submitted in sealed envelopes to the KPA. They
ere opened with the bidders present. At this point negotiations
)uld take place, with a contract specialist (usually a Korean na-
onal), contract officer, and the bidders discussing the proposal and
le costs.

In an interview with the subcommittee staff, another KPA ofii-
al explained that when the bids were opened, a competitive range
as established ^^* and negotiations began — mostly over price but
:casionally over specifications. The contracting officer then made
le final decision.

All payments by the U.S. Government were made in U.S. dollars
rectly to the Bank of Korea. After approval by the KPA, the
ink paid the contractor in won upon presentation of the required
jceipt from the Korean Military Contract Association (KMCA).

orean measures to control procurement

Much of the investigation centered around the KMCA. In the
)60's, in order to promote a unified effort for national develop-
ent, the Park Government had called for the establishment of
irious semiofficial associations which were to exercise control
^er all commercial activities in the country. In a report to Senator
'illiam Proxmire, the Department of the Army described the gen-
is of the KMCA:

The KMCA exists under the requirements of a Cabinet Decree No. 450, Enforce-
3nt Decree for the Provisional Law for the Promotion of Military Supply (ROK

..w 979, Military Supply Promotion Law). ROK Law 979 requires that before a
)rean contractor can do business with U.S. Forces, Korea (USFK), the contractor
jst be registered with the Ministry of Commerce and Industry. Practically, in

' ier to get a license, a Korean contractor must be recommended by the association.

' le role of the Ministry of Commerce and Industry of the Korean Government is
at the Ministry is charged to: "Administer all affairs in relation to fostering

: litary supply business and those who are engaged in the above-mentioned busi-
ss." The Korean Military Contractors Association is one of 115 associations that

' ist for fostering various types of business in Korea. ^®®

Law 979, which governs the procurement of military supplies by
iiy nation or organization in the ROK, was deemed necessary,
i cording to one Korean whom the subcommittee staff interviewed,
1 cause in earlier years Korean contractors were competing irre-
ionsibly, making bids below production costs, supplying shoddy
jiods, and even fighting among themselves with guns.

Over time, the KMCA emerged as perhaps the most powerful of
1 e quasi-official associations. Its position resulted from the strong
bvernment concern over national economic stability and the im-
]»rtance of military procurement to the economy.

According to several U.S. officials, the KMCA was actually able
1 control the bidding for KPA contracts. It regularly received
i formation beforehand concerning what projects were contemplat-

'"The competitive range was set by the high and low bids which came within what the
1 ited States considered to be a reasonable cost range. , t • • rk

»• Letter from Harold L. Brownman, Assistant Secretary for Installations and Logistics, Dec.
'i 1976, with 14 enclosures.

218

ed by the KPA and what its supposedly confidential cost estimate
were. The leaks, according to one official, originated with the mani '^1
Korean nationals employed in a variety of jobs in KPA ofiicd ^!
They let out information on initial requests, the IGCE's, and tb! '
commitment of funds "all along the line." All of these, includid '^
the bidders' lists, which were "regularly leaked every night," wei^J
provided in some way to the KMCA.^oo American employees i;
various offices may also have been involved, the official said.

One Korean informant told a U.S. Army CID member that whe
he was involved with the KMCA, all Korean employees of KPi
were required to sign a statement promising to furnish KPA infoii
mation to the KMCA.^^o^

There was also evidence, according to a DARCOM report, that a
the requesting agencies the initial cost estimates prepared by th
units requiring the procurement were sometimes increased, "[a]s
result of influence by the association.^^oz

Although the U.S. Government authorities were long aware c
these activities, they were "unable to do much about it,' accordini
to a former KPA official.

Once the KMCA received the information it needed, it selecte'
one contractor to be the winning bidder and controlled the pricii
levels of the bids. One former KPA official made a study of biddin|( *
practices in Korea over a period of 3 years. He told the subcommil*
tee staff that he found a definite pattern in the placing of bids an»j
awarding of contracts. One single bid was always within about
percent above or below the IGCE, just close enough to be accept j
able. The other bids invariably came in significantly above tha^
one. '

Former KPA officials reported that procurement control wa^
exercised at KMCA meetings, held shortly after the contractorj
received the KPA solicitations for bids, which the KMCA require*]
they turn in within 24 hours after receipt. Potential contractor -
would meet at the KMCA to choose the "successful" contractor am
the bid price. Other members were told to submit higher bids. Evei
if negotiations changed the final price, the ranking of bidder']
never changed.

In 1974, an informant told the CID that winning bidders had t«i
pay one-half cent per dollar of the total dollar value of the individ*
ual contract to the KMCA. On top of that, the winning bidder ha(^
to pay to the KMCA or one of its supporting organizations 5 morr
percent of the final contract price.^^^ i

The influence of the KMCA apparently reached its apex in tb'
fall of 1973, when it and other MCI-approved organizations "almos'
totally controlled USFK [United States Forces, Korea] local pro
curements" according to a DARCOM study. ^o-*

In that year, the U.S. Government registered strong complaints^
and the ROK Government at last agreed, on November 23, 1973, U\
cooperate to some degree. However, it was not until June 1975 tha

*~ The committee staff learned, for example, that Air Force investigators once discovered ij
representative of a Korean engineering firm in possession of a copy of an IGCE for procuremen
of roofing tile for the Yongsan Air Base. IGCE's are never supposed to leave the KPA.

"" U.S. Army Report on the Investigation, No. 74-CID-038-59615, p. 13 (hereinafter CID

»»» Op. cit., PMR, p. 13.

**=• Op. cit., CID, pp. 6-7. These statistics were supported in a general way by the opinions c
former KPA officials. I

»»* Op. cit., PMR, p. 12. I

219

ny evidence appeared that direct involvement by these associ-
tions had lessened, the DARCOM study said. Indirect means of
jntrol by the KMCA and other groups, however, persisted and
ere almost as powerful.^o^ in 1976, Assistant Secretary Brown-
lan, in his covering letter to Senator Proxmire, summed up the
pa's problems as still ''serious and difficult."
Another question raised in connection with the procurement
roblems was whether or not the KCIA was involved. Assistant
ecretary Brownman wrote to Senator Proxmire: 'It has been re-
Drted that until 1973 the ROK CIA controlled all USFK contract-
ig." However, information also indicated that the KCIA "was
amoved from the procurement environment after strong protests
irough the Joint US-ROK SOFA Committee. "^oe
The KCIA role had apparently been played through organiza-
ons such as the Cha Yu Hoe (Freedom Association), later called
le Kong Che Hoe (Mutual Benefit Association). The Kong Che
oe was the enforcement arm of the KMCA; its task was to assure
)mpliance by local contractors. Businessmen who tried to make
,w bids for KPA contracts (called "dumping") were marked as
raitors" for losing income for the Korean economy.^o' Further-
ore, any contractor who tried to circumvent the KMCA and deal
rectly with the KPA found himself in trouble with the Kong Che
oe.

Army CID investigators documented that instances of Kong Che
oe enforcement were not unusual. Its principal tools were intimi-
• ition, loss of business licenses, and personal violence. In a press
lease dated October 27, 1976, Senator Proxmire, who had con-
acted his own investigation into procurement in Korea, listed
I ven instances of Kong Che Hoe violence reported to him by the
'!D, including one case where an American small businessman in
^orea was assaulted when he refused to withdraw a low bid on a
.S. Government contract.

Official U.S. Government reports indicated that the Kong Che
^oe was disbanded on July 31, 1975, through action by the Korean
National Police, after vigorous objection by the U.S. representative
i a SOFA meeting. A DARCOM document, however, indicated
lat as late as June 1976, "fear of reprisals still serves as an
•fective force to impose KMCA's will upon Korean contractors. "^°*
I As to any specific role played by the Government of Korea itself
; collusive bidding. Assistant Secretary Brownman could only
] port to Senator Proxmire in December 1976 that:

The KMCA is responsible to the ROK Ministry of Commerce and Industry,
liyond the known relationships and the officially stated role of the MCI, we can
<ly conjecture about the degree to which the ROK government may sanction or
( itrol these bidding practices. =*<**

jie U.S. response

U.S. procurement officials in Korea considered KMCA contract
lanipulation an ''unending problem," according to one former offi-

" Ibid.

" Brownman, Enclosure 9.

"Op. cit., CID. p. 3. . X. ^ TT

'*0p. cit., PMR, p. 12. The Army CID, conducted a 1-year investigation of Kong Che Hoe
cing 1974-75. Its findings are in CID. op. cit.
** Brownman, Enclosure 5.

220

cal. It seemed that over the years each step forward toward son
solution was followed by an impasse over a technicality that resuljl^i
ed in loss of momentum.

During the 1960's and 1970's the procurement problem engeMjon
dered a number of official reviews, investigations, reports, reprj j^tl
sentations, and other actions. At one point the United States co) Jdd
sidered asking for a rescission of Law 979, which it regarded as tK g,
source of many of the problems. That law, as interpreted by tl^^
KPA, conflicted with one provision of the SOFA. The first sentenc
of paragraph one, article XVI of the SOFA, contains the phras
''without restriction as to choice of contractor * * *." The U.l
Government regarded the requirement for membership and a]
proval by the KMCA as a restriction. The Koreans protested th{
requiring a contractor to belong to an association was not a restri
tion and therefore no conflict with SOFA existed. In fact, the RO!
Government argued, the use of the KMCA was authorized unde
paragraph two, article XVI of the SOFA, which reads:

Materials, supplies, equipment and services which are required from local souro
for the maintenance of the United States Armed Forces and the procurement
which may have adverse effect on the economy of the Republic of Korea shall
procured in coordination with, and when desirable through or with the assistance cWp'
the competent authorities of the Republic of Korea.^^'' [Emphasis added.] | jisoi

It was evident that many of the KPA difficulties were caused b' *
differing interpretations of certain key clauses in SOFA. Howeve J "
the June 1976 Procurement Management Review Report conclude' ^
that even if article XVI of the SOFA were revised, the result ft ^
would be negligible:

* * * the differences in the procedural approaches to procurement between tl:
U.S. and ROK are fundamental and are not likely to change, as evidenced by 1 ™
decade of experience. The perceived rights of both parties are based on tradition!* 1
cultures, economic laws, and business practices which are currently accommodate;-: -jui
by the provisions of SOFA, section XVI. Therefore it will not likely be practicable 1
alter or revise the existing SOFA language.^" , ,.

' 1])

'0'

'ip
|i

:f
:fflt
p

list

n
m

ieoi
1

The U.S. Government ultimately decided it would be impruden
to seek a rescission of Law 979. Secretary Brownman wrote t
Senator Proxmire that **[t]o attempt to neutralize this law an|ji?,
decree of the Republic of Korea would not only deprive us of thl
opportunity to benefit from them but would also be considered a!
effort to interfere in the internal affairs of another country."*

On June 13, 1975, Lt. Gen. John Murphy, USAF, the U.S. repre-
sentative at the SOFA conferences, wrote a letter to Lee Sang Oct
the Korean representative, complaining strongly about the KMCi
and stating that "organized collusion is rampant." ^la This lett©]
was credited with eliminating the influence of the Kong Che Ho«
and apparently led to the removal of the KCIA from the procure^
ment process.

In November 1975, a DARCOM Procurement Managemen
Review team studied procurement problems while on a routint:
inspection tour of Korea. The team wrote a long report in Juno
1976.21* According to one former KPA official, this report, whicli
recommended that KPA contracts be made directly through th«l

""As quoted in PMR, p.9. op. cit.

»" Ibid., p. 10.

'" Brownman, Enclosure 3.

»" cm. Exhibit 95, p. 3.

"« Op. cit., PMR.

221

OK Government, was opposed by the KPA on grounds that it
died to reflect improvements which the KPA had implemented
nee 1974. At that time, it had began to shift from rote adherence
) normal competitive procurement regulations to making awards

'irectly to single worthy contractors.

' Another study was conducted by the same DARCOM review
jam. In November 1976, it issued a report entitled 'Improved
rocedures for Procurement in Support of the U.S. Forces,
orea."2i5 n began with a general observation that
n]ot withstanding all efforts exerted to date, procurement in the
OK is still in need of corrective action * * * .^le It then consid-
•ed various alternative solutions. Only one was recommended. The
i-oposal to handle procurement directly through the ROK Govern-
ent was unacceptable because any government-to-government
p-eement should be entered into cautiously, on a test basis at first
id starting in small increments, which would be too time-consum-
g. On the other hand, to proceed less cautiously would be to
' vite trouble. A proposed use of third country personnel (Japanese
• Taiwanese nationals) to handle procurement might violate the
rms of the SOFA. The replacement of Korean nationals with U.S.
irsonnel would be excessively costly and impose language prob-
ims. Procurement from the United States or other countries
ould be too expensive. Another alternative — for the KPA to select

. single contractor and deny the right of KMCA to intervene — was
)t considered feasible because it would be impractical to deny the
le of the KMCA as an integral functionary of the MCI. A vari-

.ion would be to allow the KMCA to choose a candidate from a

ilective U.S. list, but that suggestion had serious drawbacks be-

(use it "would appear to be improvident to delegate such authori-

' outside the U.S. Government. 217

S. procurement system changes

The report contained one solution that seemed acceptable. Essen-
illy, the new method of procurement, called Controlled Selected
Ingle Source Procurement (CSSSP), enabled the KPA and the
it^DE to, select, on a noncompetitive basis, one contractor from a
'.\t of reliable bidders and to go directly to him with a contract
jfoposal. In rationalizing this new approach, an Army report
jated:

\ttempts to achieve open competition in the ROK works against the U.S. Govern-
i!nt rather than to its favor * ♦ * Competition, as defined by U.S. laws and
1 ^lations, is incompatible with conditions now existing in the ROK. It is time to
f ft from open competition for selecting a source to an alternative method which
i entially provides for non-competitive selection of contractors.^^®

Under authorization of the new CSSSP plan, procurement re-
tirements were reviewed; KMCA or MCI involvement was dealt
Uh on a case-by-case basis; unsatisfactory contracting firms were
( minated from participation; the selection of contractors was con-
tolled by the KPA in order to provide fairness; and sources were

'*0p. cit., study report.

'^Ibid., p. 14. For an elaboration of the following discussion of alternative solutions, see pp.
S Also see a summary in Brownman, enclosure 4, op. cit.
"Op. cit., study report, p. 12.
'*Ibid., p. 14.

222

selected from a list of worthy contractors in accordance vn.t:\^
Korean Law 979.

The authorization further required a high-level review of an
deletion from the prospective contractors' list. It also postulate
doing business with only the most responsible contractors, and i
provided a rotation of names on the bidders' lists. A board wa
established to handle the selections. The plan still allowed for th
use of competitive procedures where there was a condition of rea
competition. The plan also called for some internal reorganizatio
of the KPA and provided for certain changes in the mix of Korean
and Americans.

One further result of the changes was the elimination of som
personnel positions and the dismissal of some employees. In the fa
of 1977, 7 of the 35 Korean inspectors were fired by the KPi
because of bribery.

In sum, a DARCOM memo expressed the new concept and th
need for the new changes as follows:

The essence of the CSSSP concept can be stated simply: (a) procurement la'
directs solicitation of a maximum number of sources, consistent with the nature ^
the supplies and services; (b) it has been determined that the law should not applj
here in the Republic of Korea where it cannot be effectively applied; and (c) the la'
should not be applied by rote because, here in the Republic of Korea, the impact ;
obviously detrimental rather than beneficial to the interests of the U.S. Govei
ment."»

Positive results

{>:

One U.S. official in Korea reported to the subcommittee stalj
that, as of December 1977, no collusive bidding cases had occurre<
since the new CSSSP procedure was adopted. He was pleased tha*
the new system had put everything out in the open and resulted ii'
high-quality procurement at better prices. ^

According to another source, the new system had been a grea|f ^
help in enabling the KPA to analyze which contractor could do th
best job and in eliminating mismatches between U.S. Government
needs and bidders' capabilities. It also eliminated, he felt, the neei!
for payoffs outside the system. I

In general, KPA authorities felt that at the end of 1977, the ne¥
noncompetitive system was working and that the KMCA could m'
longer exercise its former muscle. They noted that any KMCI
intercessions henceforth could take place only after the Unite<-
States had selected a contractor. A U.S. engineer who had serve*'
with the KPA was of the opinion that the KMCA could actuall;;
serve a useful function in that it could put pressure on bidders t'
fulfill their contracts. He noted that when one contractor ha«5
absconded, the KMCA forced other contractors to fulfill the con'
tract, in keeping with the spirit of national pride and disciplin€

As for the general reaction of the Korean business world, th
Seoul newspaper, Chosun Ilbo, on May 20, 1977 indicated that th'
impact of the new CSSSP method had not been lost on the local
contract community. It observed: i

The profitability of military sales has * ♦ • been dwindling in recent years parti;
because of heated competition among domestic exporters and because of the redu(j
tion of contract prices by 15 percent by the U.S. forces authorities by replacing opei'
competitive bidding with a designated bidding system.

"•Op. cit., DRCPP-R, enclosure 1.

223

The observation implied a great deal. Though the figure of a 15-
srcent price reduction was only a guess, it nevertheless reflected
le popular impression that profits had been greater before and
lat the U.S. Government had developed a more effective means of
)ntrolling the procurement process.

onclusions

The collusive bidding practices of the Korean system made the
sk of the U.S. Government procurement agencies a difficult one.
I coping with the problem, management efficiency was affected
16 DARCOM report of June 1976 stated:

* ' • [t]he time and energy of KPA managers have been in large measure
nsumed in attempting to acquire needed supplies and services at fair and reason-
le prices, with little time to apply to improvements of procurement techniques,
3thods, and processes, which are the essence of procurement management. It is
ry difficult to be effective and efficient when doing business under these condi-
.ns."°

As to the issue of additional cost to the U.S. Government, opin-
:ns differed. The yearly volume of procurement distribution by the
;PA was estimated in 1976 at $44 million,^^^ with an expectation of
i)0ut $50 million for the next fiscal year.222 A press release by
Ji^nator Proxmire on October 27, 1976, which was widely quoted by
ie media, stated that "unofficial estimates of the rate of extra
jofits arising from artificially high prices range from 30 percent
1 50 percent and may involve substantial amounts." ^23

On the other hand, an article in the Washington Star, dated
<:tober 28, 1976, quoted a DOD spokesman as having said, "To
(.te, we have found no evidence of large-scale padding of con-
tacts." Moreover, whereas Senator Proxmire's press release an-
]>unced that "collusive bidding practices * * * are costing Ameri-
(n taxpayers an extra $15 to $25 million a year * * *," a former
I neral counsel for the KPA told the subcommittee staff that the
i:my was not losing money on procurement in Korea. One U.S.
(.server of the procurement scene remarked that because of the
(fficulty of assessing costs in Korea, there was simply no way of
^ rifying or disproving any estimates of dollar loss.

Another former KPA official also took exception to the 30 to 50
1 rcent overpayment figures publicized by Senator Proxmire. How-
( er, he said, even if the percent is correct, the Senator's figure of
i $25 million loss per year was "impossible." Nevertheless, the
sme official did admit that in the area of construction costs, the
IS. Government was probably paying excessive prices for goods
cen of inferior quality.

Assistant Secretary Brownman queried General Murphy about
Is estimate of a 30- to 50-percent overpayment. The General
{reed that the numbers for the most part were not "auditable,"
It that in his opinion overpricing had occurred. He further re-
larked, though, that the estimate was included in his letter to his
l)rean counterpart for "shock value." The Assistant Secretary

°0p. cit., PMR, p. 14.

'Op. cit., study report, p. 8.

^ Op. cit., PMR, p. 8. ,.. I. • u J

"^ Op. cit., these figures apparently were taken from the Brownman letter, which in turn had

ted the unofficial figures suggested in Lieutenant General Murphy's letter to his Korean

'emment counterpart.

224

iti

i
m

finally concluded that the KMCA procurement practices had en
ated a "substantial suspicion that prices paid by the U.S. govern
ment may be high when compared with what prices should be fd ^f
similar goods and services in the Korean marketplace." "4 j f

According to one knowledgeable observer, the problem of tryin
to assess U.S. Government dollar losses in the procurement climat
in Korea was complicated by the continuing inability on the part c
the KPA to establish a valid cost base. An IGCE is normall
determined by a mix of factors such as labor costs, cost of mater
als, overhead costs, and inflation, all of which are essentially de
rived from local working prices and conditions. In Korea, the KPi
had not yet determined exactly what a good value was. Hence, i:
the past, if local cost factors were uncertain, the U.S. GovernmeDi
estimates were also of necessity uncertain. j

Although implementation of the CSSSP was expected to providi
greater opportunity for the negotiation of realistic prices, Assistan
Secretary Brownman admitted that "pricing problems will contir
ue to prevail in Korea to some extent, and can only be minimize*
by application of intensive management emphasis and diligent ap
plication of the talents and skills of competent specialists." "5 Untj
the problems are minimized, the U.S. Government will often hav
to depend on old contract prices as the general standard.

The Koreans had raised as one justification for their procure!
ment practices — the argument that if KPA contracts were not kep
artificially high, the United States would not spend all the mone;i
available for Korea. The June 1976 PMR study observed, however W'
that "all available U.S. funds would generally be spent anjrsvay t^' *
meet the high level of U.S. requirements in Korea, which hav( Is ^^
always been greater than the availability of funds * * *." 226 t|K

Underlying much of the above discussion is the problem of tryini
to force a competitive system on a culture where the concept i
essentially alien. One KPA official recounted that he had felt froni ^^
the beginning that competitive bidding was not suitable to Koreail ^^
cultural patterns. The real problem, he said to staff members, waii J
not the ROK Government, but a "bad fit" between American pracl*"^
tices and Korean culture. A former KPA engineer added that U.SI'
procurement people are "brainwashed" about the need for a comj
petitive system and that they should have accepted the fact tha,
the Korean system was simply noncompetitive. ■

Assistant Secretary Brownman in his report to Senator Proxmirq
made the same point: "* * * [c]ompetition as practiced in the.
United States, does not prevail in any segment of the Koreai
economy. It is our belief that this condition emanates from a cul;
tural philosophy * * *." 227 in sum, he wrote: \

Efforts at unlimited, open competition have a deleterious rather than beneficiaj
impact on both the U.S. and the ROK. Heretofore, we have been reluctant t<i
acknowledge the realities of this issue, and perhaps admit that our procedures maj-
not be operable within a foreign environment."* ,|

"■•Op. cit., Brownman, enclosure 8. Because the KMCA's winning bids were always extremel)
close to the KPA's advance estimates— within 1 percent above or below (see CID, op. cit., p. 4)
allegations of overpricing are necessarily based on the degree to which competition might havi
reduced the final cost.

^"Op. cit., Brownman, enclosure 8, p. 2.

"®See a discussion of this in PMR, p. 13, op. cit.

'^'^'Op. cit., Brownman, enclosure 5.

""Ibid.

225

pi; -

Although the Korean way of doing business probably involved
j creased costs to the United States, it is ironic that the MCI and
1e KMCA, obstructionist as they have been, contributed impor-
Intly to the "remarkable degree of discipline" "9 j^ economic mat-
Irs which U.S. experts credit with making that country stable
(ough to allow U.S. troop withdrawals to begin. Because North-
(st Asia has been of such strategic importance, the United States
]s been previously willing to pay the cost.

]iOBLEMS OF POLITICAL FUNDING AND U.S. TRADE AND INVESTMENT

IN KOREA

In 1975, the Senate Subcommittee on Multinational Corporations
lid public hearings on political contributions to foreign govern-
imts, the result of disclosures during the Watergate investigation
tat American corporations had made illegal political contributions
ii the United States. At a hearing on May 16, Gulf Oil Corp.
cjclosed that 80 percent of the $5 million it had paid in foreign
jlitical contributions worldwide went to the Democratic Republi-
cs Party (DRP) of the Republic of Korea.^^o

Since that time, the issue of corrupt business practices abroad
hs been under scrutiny by the Internal Revenue Service, Securi-
t s and Exchange Commission, Federal Trade Commission, Depart-
r jnt of Justice, Department of State, and various committees of
(ngress. It has also been the subject of numerous internal inquir-
it by individual U.S. firms. These investigations have resulted in
rw policy guidelines, renewed commitments to policies previously
e acted, new disclosure requirements, and legal penalties.^^^

Although there had been numerous reviews and investigations
i; .0 corrupt business practices, some in progress at the time of this
i^estigation, the subcommittee decided to include corporate pay-
Esnts in its study. Previous investigations and policy reviews had
t^en a broad-based approach to the issue and had not addressed
t i effects of corporate payments on a specific bilateral relation-
s p. The subcommittee believed that corrupt business practices
i\3ded to be viewed in the national and international setting in
V ich they occurred since only then would their foreign policy
cisequences become clear.

The subcommittee sought to shed light on a number of complex
qestions. To what extent had other U.S. corporations had experi-
e 3es similar to Gulf in their business with the Republic of Korea?
Viat were the major forces contributing to corruption in corporate
rations between the two countries? Were they the product of
ccumstances peculiar to one period in Korean development, or a
citinuing phenomenon? To what extent were such practices at-
tDutable to the personal motives of selected Government officials,
twhat extent to systemic political and economic forces in Korea?
V)at was the policy of the Korean and U.S. Governments with

See Walsh testimony, KI-6.

'Senate Foreign Relations Committee, Subcommittee on Multinational Ck)rporations, hear-
in, May 16, 1975, see appendix C-156.

' The most comprehensive overview of the various executive branch and congressional mves-
tiitions is contained in Jacoby, Neil H., Peter Nehemkis, and Richard Eells, Bribery and
E:)rtion in World Business: (New York: Macmillan, 1977). See also the article by the same
auors, "Foreign Payoffs Law: A Costly Error," Sunday New York Times, Jan. 22, 1978; both
ty article and the text of the Foreign Corrupt Practices Act of 1977 appear m the appendix
C- )8 and C-161 respectively.

226 I

regard to corruption, and how did they translate into practio
Finally, what were the implications for future Korean-Americe
relations?

Anwering these questions presented formidable difficulties. Fin
in most cases, corrupt practices were kept hidden. This would n
have been necessary were the practices acceptable in Korea, tl
rationale put forward by some corporations. There is no evidence
suggest that Koreans are any more accepting of such practio
than Americans. In fact, because opposition to corruption hj
played a significant role in changes of government in Korea, i
citizens have already shown great political sensitivity to tl
issue."^

A second difficulty was that corporations expressed justiflab
fears that any disclosure could place both individuals and firms :
jeopardy. One U.S. corporation stated: :

• * * In our judgment a company like [our Korean-based subsidiary] is the victi i
of the prevailing system and business and government climate in Korea. It has
all times struggled to operate without violating the laws of Korea. It remains a fa
of life, however, that among the possible or probable adverse consequences of aif
dissemination of the information herein furnished, one of the least desirable woui
be the placing at risk of the freedom and safety of both Korean and Americij
employees of [our subsidiary] ^^^ ;

A number of firms pointed to article 104 of the Korean Crimim^
Code, promulgated on March 25, 1975, which makes it a crime f(j
any Korean outside the country to "slander the state" or engage i,
activities "which may harm the welfare and interest of or defan
the Republic of Korea." The statute established criminal sanctioi
for Koreans who engage in activities defined in the above terms "i
association with foreigners or foreign organizations" in Korea.''
One firm had asked its Korean counsel — two prominent Seoul a
torneys — for an interpretation of article 104. They responded:

This recently enacted statute is very broad in its scope of applicatio:
Furthermore, its application could occur in a case where information once given
utilized by others for purposes subsequently characterized as defamatory. Artie
104 was apparently enacted to impede Korean nationals from collaborating in pre
reports exploiting scandalous matter. Constitutional safeguards aimed at ambiguoi
provisions of Article 104 are inoperative as a defense to prosecution under th
article.'"

Historical background ^^^ 1^'

iill

U.S. corrupt business practices in Korean-American relatior'
have roots in the recent history of political and business corruptio
in Korea. One of the first pledges of the military regime after th
1961 coup was the elimination of corruption."^ In carrying out th
pledge, the Government investigated and arrested 51 "illicit fo ti
tune accumulators," including some of the heads of the leadinifjl

i
i

"* Ck)rruption was at issue in each of the transitions from Syngman Rhee's Government to tl [
military junta. See, for example, Henderson, Gregory, The Politics of the Vortex, (Cambridi
Harvard, 1968) and Kim, Joungwon A., Divided Korea: The Politics of Development, (Cambridi
Harvard, 1975).

"3 Letter from a U.S. corporation to the subcommittee, June 16, 1978.

"* Article 104 is reprinted in appendix C-160, as presented in The Emergency Christif
Conference on Korean problems, editors, Documents on The Struggle for Democracy
Korea, (Tokyo: Shinkyo Shuppansha, 1975), p. 250. i

"* Letter from a U.S. corporation to the subcommittee, Apr. 13, 1978.

"* Documentation was available for all information in this section unless otherwise specific
Where a specific reference is not cited, the source was a classified U.S. Government documer

"' Op. cit., Joungwon Kim, p. 227.

P 227

businesses in Korea.^^s The newly created Korean Central Intelli-
gence Agency (KCIA) purged the Korean civil service, dismissing
an estimated 41,000 persons for having secured jobs through cor-
rupt means."9 As early as June 1961, the U.S. Government had
been pushing the military junta to enact and follow through on a
comprehensive anticorruption program. That became a precondi-
tion for releasing $28 million in supporting assistance, held up as a
result of the coup.

Even while fighting corruption, the new Government soon
showed signs of the problem. By August and September 1961, a
factional split within the military junta began to widen. It centered
around the manner in which a committee within the Supreme
Council for National Reconstruction (SCNR) had handled the con-
fiscations of ''illegal wealth." The head of the committee, Yi Chu II,
was head of the Hamgyong faction.^^o in September, the KCIA
arrested 28 persons, including advisers to the members of the Ham-
gyong faction and prominent businessmen from Hamgyong Prov-
ince. There were reports that Yi Chu II was using his position in the
SCNR to favor certain businessmen from Hamgyong Province. In
late September 1961, Ambassador Berger was informed authorita-
tively that in order to maintain stability, the junta had decided to
deal openly with the appearance of corruption in its midst, rather
than covering it up."^

By late October 1961, the sanguine tone which had characterized
Embassy reports following the coup had become tempered. Com-
menting on the overall situation in Korea, the Embassy reported to
Washington that the junta was displaying leniency toward those
arrested for corruption after the coup; that signs of corruption and
graft were reemerging at the highest levels of the Government; but
that the Embassy still hoped the junta's anticorruption program
might lead to a reduction in requests for political contributions and
bribes. One result would be to lower the cost of doing business in
Korea.

By February 1962, the Embassy's hopes were overshadowed by
serious concern when it received information on wide-scale irregu-
larities by the KCIA under Kim Jong Pil. There were reliable
indications that the KCIA was deeply enmeshed in commercial
enterprises such as the construction of the Walker Hill resort and
the importation of automobiles from Japan. It was later estimated
that the KCIA netted several million dollars from the Walker Hill
project. During the spring of 1962, the KCIA was embroiled in
covert manipulation of the Korean stock market, and this oper-
ation was estimated to have brought in close to $40 million. Ironi-
cally, coincident with this activity, Kim Jong Pil told a visiting
high-level State Department official that the junta's ban on politi-
cal activity was necessary to ''eliminate corrupt politicians."

"• Kyong-Dong Kim, "Political Factors in the Formation of the Entrepreneurial Elite in South
Korea, ' Asian Survey, 16, (May 1976), see appendix C-165.
' "• Op. cit. Joungwon Kim, p. 233.

"° Hamgyong is a province in what is now North Korea. Ardently anti-Communist military
leaders from Hamgyong-do were a distinct faction within the junta. See Kim Se-Jin, "The
Politics of Military Revolution in Korea," (Chapel Hill, N.C.: University of North Carolma Press,
1971), pp. 58n, 92. „ ^^,

"' Rosenthal, A. M., "Korea Junta Seizes Graft Inquiry Team," New York Times, Oct. 8, 1961;
see appendix C-162.

35-508 O - 78 - 16

228

Later in June the Embassy reported that Prime Minister Song
Yo Chan had resigned because of the stock market scandal amid
allegations that the KCIA, Kim Jong Pil, and other Government
officials had "made a killing."

In January 1963, infighting within the junta led to public disclo-
sure of a secret preliminary agreement between Korea and Japan,
authored by Kim Jong Pil (the so-called Kim-Ohira memorandum),
and the KCIA scandals of the previous year.^^ One of the central
figures of the coup— Kim Tong Ha— resigned from the junta.^^a It
was reported after his resignation that Kim Tong Ha was receiving
support from Korean businessmen who were upset over Kim Yong
Tae s 2'»4 and Kim Jong Pil's attempts to control their money.

The disclosure of the Kim-Ohira memorandum unleashed
charges that Kim Jong Pil had received $130 million from the
Japanese as an advance payment to be used for financing the First
Five- Year Plan and an additional $20 million to finance the DRP
in the upcoming elections. Kim Jong Pil had apparently been
dealing with the Japanese as early as October 1961. In February
1962, the Embassy was informed that an Israeli businessman,
Shoul Eisenberg,^*^ was arranging meetings between Japanese busi-
nessmen and Kim Jong Pil.

The inauguration of the DRP in early January 1963 led to even
greater factionalism, which apparently catalyzed the various disclo-
sures of January and February 1963. Among those cooperating
with Kim Jong Pil on the formation of the DRP were a number of
Chang Myon supporters such as Suh Jung Kwi,^*^ who in October
1961 had been indicted for bribery.

The framework of the new party was clearly antipathetic to the
interests of the Hamgyong faction of the junta. By mid-February,
the situation was untenable. Park ordered Kim Jong Pil to, retire
from political activity, in exchange for the resignation of four
Hamgyong members of the junta. When Kim refused, Park threat-
ened to resign himself. On February 25, 1963, Kim went into exile,
and Park ordered an investigation of the KCIA scandals.

In March 1963, there were indications that the investigation of
KCIA corruption was a whitewash. It was agreed that a political,
rather than a legal, solution would be reached in order to absolve
Kim Jong Pil and allow the junta and Park to save face. As a
result of the whitewash of the KCIA, the Hamgyong faction within
the junta began attacking the supporters of Park Chung Hee and
Kim Jong Pil.

'*' Op. cit., Kim, Joungwon A., pp. 241-242.

'" A retired Marine Corps major general and a leading member of the Hamgyong faction,
Kim Tong Ha has been characterized (along with Park Chung Hee and Kim Jong Pil) as one of
the three key leaders of the 1961 coup. See Se-Jin Kim, loc. cit.

'** A number of sources identified Kim Yong Tae as Kim Jong Pil's closest adviser. In the
early years of the junta, Kim Yong Tae was reported to have been Kim Jong Pil's "economic
advisor." From 1963 to the present, Kim Yong Tae has been a leading DRP figure in the
National Assembly.

"* There is considerable circumstantial evidence which would suggest that Eisenberg has long
maintained an operational relationship with Israeli intelligence. The most recent was an article
by Fred Barbash, Lee Lescaze, and Yuval Elizur, "Ugandan Plane Deal Believed Key to Israeli
Spy Operation," Washington Post, Sept. 11, 1978 (see appendix C-170.) In interviews with
Korean and American businessmen and former Korean and American officials, Eisenberg was
uniformly described as one of the most controversial figures in recent Korean history.

*** Suh Jung Kwi was also a former classmate and confidant of Park Chung Hee; subsequent
activity as a political fundraiser is described below on pp. 242-243. In 1975, a year after his
death, the Korea Herald reported that his widow was the wealthiest "income earner" in the
Republic of Korea.

229

Park's inability to deal even-handedly with corruption in the
5CNR and in the KCIA narrowed the regime's political base and
:aused friction with the United States. On March 16 Park an-
lounced 4 more years of military rule. There was concern that the
Tiove was designed to avoid a civilian government which might
nvestigate corruption. Under pressure from the United States as
A^ell as domestic Korean forces, Park reversed himself by early
\pril 1963 and announced that elections would be held.

The 1963 elections brought into the innermost circles of power a
lew group of political appointees, civil servants, and politicians.
5Cim Song Kon (S. K. Kim) won election to the National Assembly,
vhile Lee Hu Rak was appointed Secretary General of the Presi-
iential Secretariat. As will be developed further below, both of
;hese individuals, in addition to Kim Hyung Wook who became
lirector of the KCIA in July 1963, were to become intimately
nvolved in the growing web of corruption in succeeding Park
idminist rat ions .

A second group of Korean Government officials also rose to
)ower under the first Park administration and became involved in
he corruption. The most notable was probably Chang Key Young,
vho in 1964 was appointed Deputy Prime Minister and head of the
ilconomic Planning Board. In the spring of 1964, Shoul Eisenberg,
;laiming he could obtain $500 million in foreign loans for Korea
rom European sources, met with Park Chung Hee, Chang Key
foung, and other Government officials. On the heels of this visit,
ilisenberg reportedly provided loans and cash gifts to a number of
ligh-ranking Blue House officials, including funds for Chang.

The precise course of S. K. Kim's rise to prominence is unclear.
There is information, from statements made to the subcommittee
ind from executive branch reporting, that Kim was allied with
^im Hyung Wook and Lee Hu Rak. Together these three were a
;ounterbalance within the Park Government to the power and
nfluence of Kim Jong Pil. Kim Hyung Wook told the subcommit-
ee that he was responsible for convincing President Park to send
^im Jong Pil into a second exile in June 1964.^^7 The U.S. Govern-
nent agencies heard that S. K. Kim was the force behind Kim's
ixile. Probably both were responsible and worked with each other
n the development and exercise of their power.

Opposition parties claimed that in 1963 the DRP permitted a few
Korean industrialists to amass enormous profits in the sugar, flour,
ind cement industries in exchange for kickbacks to the party.^^s
Clearly these charges were aimed at S. K. Kim, among others, for
^im was at the time the leading cement industry entrepreneur in
^orea.

Park's election in 1963 did not bring an end to the DRP's fund-
•aising activities. After the election. Park sent Kim Jong Pil back
o Japan to renew the negotiations for a treaty normalizing rela-
ions between the two countries. The negotiations led to severe
)ublic turmoil in Korea and were the immediate cause of Kim
\ong Pil's second exile. An observer commented:

"^ "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
ational Organizations of the Ck)mmittee on International Relations, 95th Cong., 2d sess., Fart
, (hereinafter referred to as "KI-7").

**• Op. cit., Joungwon A. Kim, p. 253.

230

• • * The primary issue throughout the political crisis in Korea was not opposi-
tion to Japan, but opposition to the Korean Government, which [the opposition]
feared would use financial resources from Japan to further consolidate its internal
control and in so doing would create an economic dependence on Japan in order to
stay in' power The Government desperately needed financial resources from Japan
to carry out its 5-year plan, to set up a system of indirect funding for the [DRP], and
to replace U.S. aid which was rapidly being phased out."^

It was only after the treaty with Japan was signed in June 1965
that a viable laundering system for funding the party and enrich-
ing key Government officials could be set up. Indeed, in January
and February 1965, there apparently were efforts by Kim's brother,
Kim Jong Nak,"o to collect political funds for the DRP through
this process. Prior to 1965, however, the framework of the Korean
economy inhibited heavy reliance on laundered funds. The number
of joint-venture enterprises,"^ one of the primary targets of later
requests for payments, totaled only six, four of which were Ameri-
can. From 1965-67, there were 27 additional joint-venture projects,
and the rate of growth of such projects continued to climb through
1973.2"

The laundering system of funding the party largely, though not
wholly, from foreign sources of capital appear to have occasioned
major alterations in the structure of power in the Korean Govern-
ment. While Kim Jong Pil continued to play a substantial role in
fundraising, Park Chung Hee shifted from primary reliance on him
and gave Kim Hyung Wook, S. K. Kim, and Lee Hu Rak greater
responsibilities. Apparently Park was no longer inclined to listen
solely to Kim Jong Pil and the DRP; there were indications in 1965
that he had sided with Lee Hu Rak against Kim Jong Pil in a
struggle over the assets of an automobile company, a struggle
which pitted businessmen supported by Lee Hu Rak against busi-.
nessmen supported by Kim Jong Pil.

Another indication of the degree to which commercial activities,
foreign business, and the laundering system of funding politics in
Korea had become intertwined with power politics came from ex-
ecutive branch reporting from Seoul. One report noted that the

"*0p. cit., Joungwon A. Kim, p. 257. The system of funding the DRP is characterized as;
"indirect" by Joungwon A. Kim, but this is not quite accurate. Under the Korean political
parties law of 1962, political parties in Korea can only receive contributions from their party
memberships. Membership in Korean political parties is considerably more restricted than is
the case in the United States. After the 1963 elections the DRP continued to receive funds i
directly from party members, but these members were not the original source in the circum-i
stances under analysis here. Rather, the loan and commission moneys of domestic and foreign i
businesses were "laundered" through DRP members acting as fundraisers, either through the
extortion of domestic and foreign businesses or through the bribery of DRP fundraisers by these*
businesses. On the question of Korean law concerning political payments, see the Congressional i!
Research Service study prepared for the subcommittee, "Laws of the Republic of Korea Concern-'
ing Bribery, Political Donations, and Foreign Exchange," appendix C-159.

**<• Kim Jong Nak was reported to have been involved in a number of transactions in thai'
1960's in which funds were transferred to the DRP. In the early 1970's Kim became the agent i
for a U.S. firm — Tacoma Boat Co. — and received a 10 percent commission on a $15 million
contract. The subcommittee was unable to determine the circumstances surrounding Tacoma's'
employment of Kim because some of the American principals could not be located. |

**' There are five basic ways that American and other foreign corporations may enter into
corporate relations with the Korean economy: Joint-ventures, technical assistance agreements,
loan contracts, subsidiaries, and simple trade. Joint-ventures are processing or manufacturing
enterprises in which the equity is partially owned by a foreign corporation and a Korean
corporation, governmental or private. The amount of foreign-owned equity may vary greatly.
Since all projects involving foreign equity must be approved by the Korean Government, they
are open to governmental influence with regard to political payments.

»" See Guide to Investment in Korea, Economic Planning Board, 1977; U.S. Equity Investment
Approved, 1962 through June 1977, U.S. Embassy Seoul, Department of State, 1977. From
October 1964 to 1967, the Korean Ambassador to Japan was Kim Dong Jo. The subcommittee
received allegations from a number of sources that Kim Dong Jo was active in facilitating the
transfer, through various covert means, of political funds from Japan to Korea.

231

increasing importance of economic and commercial affairs, particu-
larly since the conclusion of the ROK-Japan Normalization Treaty
and the massive influx of Japanese commercial loans, had greatly
influenced the balance of internal ROK political affairs. It empha-
sized that the ability of key DRP and opposition party politicians to
maintain status and political viability in a preelection year was
linked directly to commercial activities as well as their ability to
provide a steady source of political funds.

By the mid-1960's, then, four primary centers of politico-econom-
ic power, more or less balanced and controlled by Park Chung Hee,
seemed to have developed: Kim Jong Pil (chairman of the DRP); S.
K. Kim (finance committee chairman of the DRP); Lee Hu Rak
.secretary general of the Presidential Secretariat); and Kim Hyung
Wook (director of the KCIA). Increasingly, Kim Jong Pil's activities
:ame into conflict with the other three, whose fundraising responsi-
bilities solidified as follows: S. K. Kim — collecting funds to be paid
by check; 2" Kim Hyung Wook — collecting funds to be paid in cash,
as well as cashing checks received by S. K. Kim; 254 and Lee Hu
Rak— establishing and managing a secret Government fund in
Switzerland."^

In addition to the above, Chang Key Young, as head of the
Economic Planning Board, also seemed to have been using his
position for fundraising. For example, in May 1966, certain Korean
businesses allegedly paid Chang for facilitating Government loans,
[n addition, Douglas Aircraft Corp. reported a request made in
1967 by its commercial agent for a disbursement of $10,000, pur-
portedly to be paid to Chang for his assistance.^^e However, Chang
did not appear to have been as central to fundraising as the other
four mentioned above.

With so many individuals vying for the President's attention and
for personal power, conflicts between fundraisers developed quick-
ly. The major one was to be between Lee Hu Rak (with Kim Hyung
Wook and S. K. Kim often aligned with him) and Kim Jong Pil.
While this conflict climaxed in 1969, it was already evident in 1965,
as previously noted.

' The machinations involving the various fundraisers were clearly
revealed in a report in the spring of 1966, which provided back-
'^ound information of the Korean Government's decision to import
:ertain foreign commodities. The Korean firm in line to receive the
import license made payments to the DRP through Kim Jong Nak
and to Chang Tae Hwa 2" for his intervention with Lee Hu Rak to
Dbtain the necessary Governmental approval. The firm also alleg-
edly made payments to another Government official in the Minis-
try of Commerce and Industry, who also approved the imports.
However, President Park disapproved the deal after he learned
from Kim Jong Nak that the commodities were not a good buy.
The Korean firm then began negotiating with another foreign sup-
plier of the commodities, with the assistance of Kim Hyung Wook,

'"Transcript of a taped conversation between Julie Moon and Kim Hyung Wook on May 16,
1975.

"* Ibid.

*" Subcommittee staff interview with a former Korean Government official, May 30, 1977.

"•See documents in appendix, C-139-149.

*»^ Chang Tae Hwa was an adviser to KCIA director Kim Jong Pil in 1961; from 1965 to 1971
1e was president of the Seoul Shinmun, a Korean Government-owned and operated daily
newspaper.

232

who interceded with a Government official from the supplier's
country. Kim Hyung Wook asked this official to persuade Lee Hu
Rak to withdraw his support for the original supplier. The foreign
official called Kim Jong Pil and discussed a pending financial
matter between his country and Korea. Kim Jong Pil then called
Lee Hu Rak and asked him to consider this foreign official's advice.
Subsequently, Lee Hu Rak and S. K. Kim met to work out details
of the transaction involving the new foreign supplier. S. K. Kim
was reportedly unhappy that the original transaction had to be
cancelled but agreed to support the new firm if the foreign official
promised not to interfere in any future dealings and if Lee Hu Rak
would support a transaction involving the original foreign supplier
and one of Kim's companies. Both the foreign official and Lee Hu
Rak were said to have agreed.

The system of laundering funds from foreign business sourcesi'
appeared to have been used to the fullest in the 1967 presidentialii
elections. By 1966, S. K. Kim had been appointed chairman of theii
finance committee of the DRP. He was said to be the principalil
channel for receipt of political funds, according to information from!!
the U.S. Government and Tongsun Park.

The 1967 elections have the reputation as the "most fraudulent!
and corrupt in the history of the Republic of Korea." **« And with
the 1967 elections came the first evidence known to the subcommit-i
tee that U.S. firms were making contributions.^'^*

Political fundraising and corruption appear to have had am
impact on decisionmaking surrounding a proposed amendment to
the Korean Constitution which would permit President Parki
Chung Hee to run for a third term. The argument put forward wasi
as follows. If Park were not to run, the party would have to find a
candidate, which would result in a major struggle among the DRP
factions, with the possibility that the opposition would win. Aside
from the loss of power, that situation had other serious implica-
tions:

* * * [With] all of the "corruption" involved in political financing for the DRP, the
[opposition party] could turn around and prosecute the DRP leadership in retali-
ation for their own treatment at the hands of the military regime. The cost of a fall
from power was too great a risk-^**"

A struggle broke out over the third-term amendment shortly
after the 1967 elections and brought to a head the political conflict
between Kim Jong Pil and the President's other political lieuten-
ants. For entirely different reasons, Kim Jong Pil and S. K. Kim

"« Korea Annual 1968, Hapdong News Agency, 1969, p. 12n.

^^^See p. 241 below and Gulf testimony before the Senate Subcommittee on Multinational
(Corporations (appendix C-156). This statement is qualified by the following. On three separate
occasions in 1975, Gulf Oil executive Herbert Goodman described Gulfs $1 million 1966 contri-
bution in the context of Korean domestic events. On those occasions, while Goodman made
several references to events which had occurred in 1966, the majority of the circumstances he
described occurred in 1963. The apparent discrepancy in Goodman's recollection might be
attributed to his confusion over events that took place in the distant past. Goodman strongly
denies meaning to suggest that Gulf made any payments in 1963. Moreover, there was no
corroborative evidence of any 1963 payment disclosed by the McCloy Committee which in 1975
conducted a special review of Gulfs overseas payments. On the other hand, former KCIA
Director Kim Hyung Wook testified to the subcommittee (in executive session, July 20, 1978)
that he had heard that Gulf provided political funds to Kim Jong Pil "at the very beginning" of
Gulfs involvement in Korea. Furthermore, Kim disclosed knowledge of details of Gulfs affairs
in Korea involving Kim Jong Pil and political contributions in the early 1970's that had never
before been made public (see the Cooke to Goodman memorandum, appendix C-157.) The
evidence available to the subcommittee was insufficient to clarify the matter.

»*'0p. cit., Joungwon A. Kim, p. 274.

233

apposed the third-term amendment, while Kim Hyung Wook and
Lee Hu Rak were strong supporters.^^i

Since the amendment required the concurrence of two-thirds of
:he National Assembly, that institution became the focal point of
:he struggle. Both S. K. Kim and Kim Jong Pil had strong bases of
jupport in the National Assembly, but Kim Hyung Wook and Lee
rlu Rak did not. Eventually, a compromise was reached in which
5Cim Jong Pil and S. K. Kim exchanged their support for the
-esignations of Kim Hyung Wook and Lee Hu Rak.^" While Lee
continued to be active as a political fundraiser and later became
lead of the KCIA,^^^ Kim Hyung Wook's political power and role as
i fundraiser began to wane. Over the next 4 years, Kim began the
Drocess of moving his funds out of the country.^^*

The year 1969 was one of tremendous economic growth in Korea,
stimulated by enormous inflows of foreign capital. Still, by the end
)f the year, cracks had begun to show in the foundation on which
his growth was based. The Korean Government was forced to
ntervene in the operation of 30 firms which could not meet their
breign loan-induced debt obligations, and some 90 firms were
hreatened with bankruptcy. ^^^ By 1971, there were over 200 bank-
•uptcies of Korean enterprises dependent on foreign loans. ^^^

After 1969, the availability of all types of loans decreased, pre-
:ipitating a decline in one of the Government's primary sources of
)olitical funds.2^' An effort was apparently undertaken to resolve
he problem by increasing funding through the tax system ^^s —
vhich meant subverting it — but such efforts were set back by the
extent of individual graft on the part of Korean Government offi-
:ials, which reflected the general level of corruption.

In 1970, there were allegations by a high-ranking Blue House
jfficial that Lee Hu Rak, S. K. Kim, and Kim Hyung Wook had
!ach amassed personal fortunes of $100 million. In testimony under
»ath before the subcommittee, Kim Hyung Wook stated that he
:ept $750,000 for his personal use from political funds collected by
5. K. Kim. He further testified that S. K. Kim had similarly
)rovided funds for the personal benefit of President Park, Madame
^ark, Chung II Kwon, Lee Hu Rak, and Park Chong Kyu.^^^

With regard to moneys delivered to President Park, documents
ind statements made to the subcommittee indicated that funds

»•' Kim Jong Pil's opposition to the amendment derived from his own personal political
,mbitions to succeed Park as President. S. K. Kim, on the other heind, wanted to use his
pposition to undercut the economic power Kim Hyung Wook and Lee Hu Rak were exercising
ver Kim's commercial activity. Kim Hyung Wook denied that he supported the third-term
mendment, but he was contradicted on this and other details by his own former secretary,
ubcommittee staff interview with Lee Baek Hee, May 23, 1977.

*«» Subcommittee staff interview with Lee Baek Hee, May 23, 1973.

*" See pages below where the argument is that Lee's power and activity as a fundraiser grew
luring his tenure as director of the KCIA.

*** Kim Hyung Wook's personal assets in 1976 were estimated by the subcommittee to be at
isst $4 million. See his testimony in executive session before the subcommittee, published in

:i-7.

»« Op. cit., Joungwon A. Kim, pp. 277-278.

*** Ibid.

**' Both foreign and domestic loans are subject to Governmental approval in Korea. Executive
ranch reporting indicated that businesses seeking such loans paid 20 percent of the amount of
he loan in political funds. i- • i r j

»" According to Joungwon A. Kim, "The primary internal means for acquirmg pohtical funds
'as through the tax system. This operated through the legislation of high tax rates, and the
pplication of lower actual rates through unrealistically low assessments. Payoffs were given in
xchange for favorable assessment rates." Op. cit., p. 278.

'^KM.

234

collected by Lee Hu Rak were placed in bank accounts in Switzer
land, ostensibly for use by the President. Lee Hu Rak and othen
also reportedly provided moneys to the President which were main
tallied in a fund stored in a cabinet behind the President's desk ir
the Blue House. The existence of Swiss accounts was substantiatec
by bank records, by Lee Tong Hoon (one of Lee Hu Rak's sons), anc
by a close confidant of a number of high-ranking Blue House
officials, including the President. (The latter source also claimed tc
have personally received funds from the President from his Blue
House cache.) Lee Tong Hoon told the subcommittee that the
moneys in Switzerland were a "government fund" for the use o]
the President; the fund, although maintained by Lee, was not foi
his personal use. In addition, Lee's son said that he maintained g
$2 million account for Lee in Japan.

An obvious question was why Park Chung Hee found it neces-
sary to have secret funds at his disposal. According to Lee's son.
the President needed to make payments to supporters, as well as tc
opposition party leaders who had been bought off. Along these
lines, according to an executive branch report, a Korean business-
man who sometimes acted on behalf of the Government alleged in
1973 that literally all opposition National Assembly members were
receiving payments. He was also reported to have stated that the
President's residual fear of military disloyalty prompted Park to
make even more generous personal contributions and payoffs to
key Army commanders in the early 1970's than in recent years.

With the upcoming presidential election in 1971; the need for
political funds intensified. In June 1970, President Park reportedly
directed S. K. Kim to put together a list of Korean businesses that
could each contribute $100,000 to the DRP. The list included the
largest Korean combines, such as the Lucky Group, Hyundai Con-
struction Co., the Samsung Group, and S. K. Kim's Ssangyong
Group. Ironically, a number of the heads of these firms had been
prosecuted by Park's military junta in 1961-62 as ''illicit fortune
accumulators."

Foreign businesses were also to be used to generate political
funds for the 1971 elections. For example. Gulf Oil was asked to
contribute $10 million ^^o (and subsequently provided $3 million);
Caltex Petroleum Corp. provided at least $1 million, and perhaps
as much as $4 million, for the DRP's use; ^^^ and executive branch
reporting indicated that the Korean agent of another U.S. corpora-
tion 272 had committed all of several million dollars in commissions
to the Blue House ($1 million was disbursed to offshore accounts in
the agent's name prior to the 1971 elections).^^^

U.S. corporations were probably not the only foreign contributors
to the 1971 elections. In April 1971, the month of the presidential

^'"Senate Foreign Relations Committee, Subcommittee on Multinational Corporations, hear-
ings. May 16, 1975, pp. 9-10. I

"'See pp. 243-244 below. ,

"* In the Gulf case, the payments were made as a result of extortionate demands by S. K. ,
Kim; in the case of the Korean agent the payments would appear to have been the result of '
extortionate demands by Lee Hu Rak; in the Caltex case, there was no evidence of either ;
extortion or bribery.

»" The firm informed the subcommittee that it had no information which would indicate the
uses to which its agent had put his commissions.

235

(lection, four Japanese trading companies ^^^ involved in the sale of
ubway cars to Korea were instrumental in a transfer of $1,2
nillion into a U.S. bank account.^s The subcommittee could not
dentify the ultimate use of these f-inds because bank records for
his transaction were routinely destroyed in 1976, in accordance
nth the bank's 5-year records retention program. However, on the
»asis of the timing of this transaction and the fact that later
ommission payments of $1.3 million were laundered through ac-
ounts in the U.S. held by S. K. Kim,"^ there are circumstances
ndicating that some or all of these Japanese moneys may have
•een earmarked for the use of the DRP in the 1971 elections.
The quest for political funds did not end with the elections of
971. As has been well-publicized as a result of this investigation
nd the investigations by the House and Senate ethics committees
nd the Department of Justice, from 1969 to 1975 Tongsun Park
enerated over $9 million in rice commissions, in addition to $10
lillion from other foreign business sources.^^^ Out of these funds,
*ark made advances, loans, contributions, and cash gifts to both
lorean ^^s and American offlcials.^^^ He stated that he resisted
laking payments to the DRP, which was one reason he lost his
ice agency in 1971, but that his successors did make them:

Senator Weicker. At no time, then, at no time then did you receive direction from
'ny element of the Government of South Korea as to what should be done with
; * * the rice commissions?

Mr. Park. That is correct • * * one of the reasons why those business adversaries
ere able to ally themselves with key Government officials was, I refused to
iccumb to anybody's pressure.

So the group that replaced me, I was told, made such arrangements whatever
ley get they will try to share that with the party in power [the DRP]. But I wasn't
illing to do that.""

*'*The four firms were Mitsubishi Corp., Nissho-Iwai Corp., Mitsui & Co., and Marubeni Corp.
his sale has occasioned considerable public and Governmental discussion in Japan and has been
iie subject of review by both the Japanese Diet and the Japanese National Tax Administration,
elected press reports on the scandal appear in appendix C-166.

*"The $1.2 million was disbursed by Mitsubishi International Corp. Sources with access to the
apanese Diet hearings informed the subcommittee that this disbursement took place in April
JTl. Subsequently, between July 28 and Aug. 13, 1971, the American subsidiaries of the other
iree trading companies reimbursed Mitsubishi International Corp. by issuing checks in the
mount of $300,000 each.

,*^*$1 million of the $1.3 million reflected transfers of $250,000 each by the four American
'anches of the Japanese trading companies to an account at the Korean Exchange Bank in
ew York in S. K. Kim's name. The $1 million was then transferred by the Korean Exchange
ank in New York to the account of the Korean Exchange Bank in Tokyo at the Chase
[anhattan Bank's Tokyo branch. This transfer was effected on Feb. 1, 1973. On February 1 and
the Korean Exchange Bank's account in Tokyo showed transfers of $1 million or more to
nknown accounts in three Tokyo banks: First National City Bank, Bank of America, and the
[itsui Bank. In May 1973, an additional $300,000 was disbursed to S. K. Kim in care of the
orean Exchange Bank in New York, bringing the total disbursements to Kim in 1973 to $1.3
illion. The additional $300,000 was also returned to Japan, in this case by direct wire transfers
' the Korean Exchange Bank in Tokyo. (Korean Exchange Bank documents, appendix C-154.)
nee Mitsubishi testified before the Diet that it paid $2.5 million between 1971 and^ 1973 to the
ime unnamed individual, the subcommittee's documentary evidence of S. K. Kim's receipt of
le $1.3 million in 1973 suggests that Kim also received the $1.2 million in 1971 when he was
aance chairman of the DRP.

"'Senate Select Committee on Ethics, hearings. Mar. 23, 1978, p. 357.

"• Among the Korean officials to whom Park is known to have provided such funds are : Kim
yung Wook; KCIA protocol secretary Steve Kim; National Assemblyman Koh Heung Moon;
CIA Station Chief Lee Sang Ho (Yang Doo Won); Secretary General of the Korean National
ssembly Sunu Chong Won; KCIA official Choi Hong Tae; National Assemblyman Paik Too
hin; and Chief Secretary to the Speaker of the National Assembly Chung Je Ho.
"• Park's payments to American officials is, of course, the subject of the investigations by the
ouse and Senate Ethics Committees and the Department of Justice.
'«" Senate Select Committee on Ethics, hearings, Mar. 23, 1978, pp. 361-362.

236

Park clearly indicated how institutionalized the practice had
became by the early 1970's:

Mi'. Park. I understand what you are saying. It was a custom for anybody who
gets into big business, especially with the help of certain individuals in the Govern-
ment, has to share the commission with the party you are referring to.

But I made the exception to that rule. That is why the late Mr. Kim [S. K. Kim],
who was a big honcho, the man who took care of all of these arrangements, was
extremely angry with me and finally he did have his way by throwing me out of
business. But I just put down my

Senator Weicker. How could he throw you out of business if the business were
not related to the Government of South Korea?

Mr. Park. It was understood that any, it was a matter of practice right up to I
think 1972 or as late as 1973. The way that they justified it was that the party
needed the money, since it is intended for individuals, they could actually go to any
business organization and say, because you are making all this kind of money, we
would like to have you pay part of it.

It was, nobody was hiding it. Even foreign businessmen had to abide by such
unwritten law. American companies, I am sure, had to do the same thing.^***

Documents ^^^ found in Tongsun Park's house also indicated that
the resources of foreign businesses were targeted by elements
within the Korean Government as sources of funds for lobbying the
U.S. Congress. These elements also saw assistance to U.S. compa-
nies as a way of winning congressional support — especially from
those Members of Congress in whose districts the companies were
located. Two documents — "Needs of Korean Foreign Policy Toward
the United States" and "Plans for Korea's Foreign Policy Toward
the United States''^^^— made this point:

11. Conduct of Diplomacy Through Advancing Interests of
Senators and Congressmen

A. PROVIDING assistance TO THE SENATE AND HOUSE

ELECTION DISTRICTS

2. Helping the companies which have invested in Korea.

(a) If a firm situated in the district of a particular Congressional member
indicates interest in investing in Korea, we give the firm assistance.

(b) We give continuous support of the larger firms which have invested in
Korea already (Gulf, Caltex, American Airlines, Fairchild) so that we can win
over the members of Congress in whose districts the headquarters of such firms
are located. [Emphasis added]

B. TWO ADVANTAGES BY ASSISTING ELECTION DISTRICTS -

1. By Helping Constituents:

(a) Senators and Congressmen will gain popularity.

(b) They in turn will actively help Korea.

2. Benefits to be gained by helping them.

(a) By purchasing products of their districts, we will be able not only to use
the voters' but also the elected officials' influence to our advantage.

(b) The commissions derived from buying their products and other business
transactions can be used to fund our activities. We will have the cake and eat it
too. [Emphasis added]

"» Ibid.

"*The authorship of the various documents found in Tongsun Park's home is in doubt,
although there is no question that whoever authored them had to have been close enough to
Park to know intimately the details of his activities, as Park himself recognized. The most
prevalent assumption is that the documents were authored by KCIA protocol secretary Steve
Kim (Kim Sang In), acting in the capacity of an intelligence agency control officer.

2" Op cit. House Committee on Standards of Official Conduct, hearings. Part II, pp. 995-1019.

237

a "Report Relating to Otto Passman,"284 the author specified how
loneys could be raised from U.S. businesses active in Korea to
[nance KCIA-supported operations against the U.S. Congress:

IV. How To Raise Funds for the United States Congress

A. Judging from the past experience, at least some $500,000 is needed each year

B. As to raising the funds, a direct subsidy by the Government should be avoided
le should raise funds out of profits generated by Government-supported business
:tivities, and request your assistance in this regard.

This same document made another point, this time relating to
ommercial agents:

C. The government-supported projects should be those of either political and
lilitary significance or that carry heavy economic impacts on a national scale. In
electing projects, priority should be given to such projects where foreigners are
Hing as agents for Korea, or projects for which no agent is being utilized. [Emphasis

Both this document and the comments made by Tongsun Park on
le Government pressures he faced over the disposition of the rice
jmmissions illustrated the seriousness with which U.S. corpora-
ons need to approach the question of whom to employ as a com-
lercial agent. Within the Korean Government, there seemed to
ave been a plan to have Government agents serve as commercial
^ents for foreign businesses, either by placing them (1) where no
)mmercial agent was already participating in a specific commer-
al relationship, or (2) by overturning existing relationships. The
ractice was particularly recommended for large-scale projects, es-
3cially of political and military significance. In that regard, the
ibcommittee was concerned that a number of U.S. manufacturers
id exporters of defense-related goods and services reportedly ac-
iired their Korean commercial agents at the direct suggestion of
orean Government officials.

Lee Hu Rak's tenure as director of the KCIA, which began in
)70, was marked by an increase in corrupt business practices
hich apparently went well beyond Tongsun Park's activities. In
[arch 1973 a prominent Korean businessman stated that Lee was
ill the man to see in order to expedite proposals on commercial
rojects through the presidential office. Lee had even more power
5 KCIA director than he had had as chief of the Presidential
scretariat.

The KCIA under Lee Hu Rak was also allegedly involved in a
ide-scale bank loan operation in Korea involving millions in il-
gal loans to business firms. The funds were said to have been
5ed both to supplement the KCIA's budget and for the personal
mefit of high-ranking KCIA officials. The subcommittee learned
lat there was a rapid turnover in bank personnel throughout
orea during the 6 months following Lee's removal as KCIA Direc-
•r.

A third large-scale KCIA operation under Lee Hu Rak involved
rec£ and indirect control over Korean exports and imports. Shin-
.1 Motors, Daihan Nongsan, and Sunkyong Ltd. were among the
rger firms reportedly under Lee's influence and control.^" Mer-
ger, by means of manipulating the allocation of the annual textile

'- Ibid., pp. 1040-1044. , ^ ^ .^^ ,

'•» This reporting was subsequently corroborated by statements made to the subcommittee by
m Hyung Wook, Lee Young In, and. Tongsun Park.

238

export quota to benefit firms under the control of the KCIA, larg
sums were obtained.

A fourth KCIA operation which began prior to Lee's tenure wa
intensified during this period. This involved U.S. military procun
ment in Korea. Executive branch reports in 1973 indicated that th
KCIA had placed a unit within the Ministry of Commerce an.
Industry to oversee military procurement, to deal with militar
contractors, and to supervise kickbacks to the KCIA.^^^

Finally, the KCIA was believed to have been involved in ''blac;
bag" operations during Lee's directorship. The subcommitte
learned that the KCIA had used Deak & Co., an internationa
foreign exchange dealer, to courier foreign exchange in black bag
into the Blue House. The subcommittee was interested in on
$20,000 payment that a U.S. corporation made to a Deak & Cc
account in Hawaii in September IdlS.^^"^ The funds were a portio]
of commissions disbursed by the corporation according to instruc
tions from its Korean commercial agent— the Korean Engineerinj
and Manufacturing Company— who had earlier directed $5,000 t
Chung II Kwon and $10,000 to Lee Sang Gyok, then a Koreai
Government official stationed at the United Nations. Deak & Cc
told the subcommittee it was unable to locate documentation oi
this transaction.

There were many who benefited from Lee Hu Rak's tenure a
KCIA director. Tongsun Park was one. Shoul Eisenberg was report
edly another. Though U.S. Ambassador Philip Habib had warne«
American firms to avoid Eisenberg because of his reputation fo
making kickbacks, *®® President Park issued instructions in earl;
1973 that the Korean Government should favor Eisenberg as i
source of financing for commercial projects. Park was reported t
have favored Eisenberg because he had provided the junta witl
needed funds in the early 1960's when the United States wa
turning down development projects it considered impractical.

Park Chung Hee s directive may have played a role in tb
Korean Government's decision to buy a Canadian CANDU nuclea
reactor, 2«9 a transaction on which Eisenberg served as agent. H*
subsequently received $20 million in commissions and fees from th
CANDU sale.2^° A Korean businessman interviewed by the subcom
mittee and a former embassy official stated that a subsequen
investigation by the Blue House turned up evidence that Mil
Choong Shik^si and Kim Jong Pil had received payments fron
Eisenberg's commissions. The Korean businessman further statei
that these findings, and the Canadian Government's own investiga
tion into the CANDU sale, led in 1975 to Kim's dismissal as Primi
Minister and Min's dismissal as President of the Korea Electric Cc

^*«See "Military Procurement Problems in Korea," "Part C-IV: Economic Relations," pi
215-225.

"' Letter from a U.S. corporation to the subcommittee, Mar. 27, 1978.

**• Subcommittee staff interviews with a former U.S. commercial counselor, Nov. 18, 197'.

^*®A general assessment of Korea's nuclear weapons capability is described in "Part C-l
Security and Political Affairs," p. 80.

»»» See issues 2-13 of the "Minutes of Proceedings and Evidence" of the Standing C!ommittee c
Public Accounts, Canadian House of Commons, 2d sess. of the 30th Parliament. Also see la
Irquhart's article, "A Scandal Revisited," Maclean's Magazine, Nov. 28, 1977, included in appei
dix,C-167. ^

"» In 1963 Min joined the SCNR and following the elections was appointed to the Presidentis
Secretariat. He held a number of Government posts in the Korean foreign service befor
becoming president of KECO in 1973. Throughout his career he was regarded as a stron
supporter of Kim Jong Pil.

239

Lee Hu Rak himself fell from power on December 3, 1973, and
^ent into exile in Europe and the Bahamas. In February 1974, he
9turned to Korea after being promised he would not be prosecuted
r physically harmed. Lee Tong Hoon told the subcommittee that
ee's fall from power was not due to either the Kim Dae Jung
idnaping or KCIA corruption, but rather to President Park's fear
f Lee's personal power. He disclosed that a close associate of Lee's
iggested at a kisaeng party that Park Chung Hee should step
own and allow Lee to become President. This was reportedly tape
3Corded and communicated to the President by Park Chong Kyu.
Lee's son also told the subcommittee that after Lee's fall in 1973*
^e locus of power quickly shifted to the Presidential Protective
orce (PPF) under Park Chong Kyu. The corrupt practices contin-
ed. While KCIA activities were sharply curtailed by the new
CIA director Shin Jik Soo, corruption reappeared under the aus-
ices of the PPF. Executive branch reporting indicated that by
[ay 1974 the Blue House had twice warned Park Chong Kyu about
is involvement in questionable business activities. Then came the
ssassination of Madame Park in August 1974, after which Park
hong Kyu resigned. By late 1975, with the death of S. K. Kim and
im Jong Pil's removal as Prime Minister, none of the major
olitical fundraisers of the previous 15 years remained in official
ositions of power within the Government. However, Kim Jong Pil
as still very active behind the scenes, and despite the CANDU
factor scandal, there was no real trouble between him and Park
hung Hee.

The same was not true for Lee Hu Rak. In 1978, his son told the
ibcommittee that Lee had not spoken to Park Chung Hee since
s return to Korea in February 1974.^92

Summarizing the events of the period, a Korean businessman
[plained that the trend was from independent centers of power
id corruption to a concentration in the Blue House. In the end,
1 payments were going to the Blue House, and the cost of doing
isiness was even higher than in the old days. The executive
*anch received an assessment of the trend up to 1973 from a
•eminent Korean businessman who observed that despite the out-
ardly dictatorial image of the Park regime, there was a cohesive-
?ss to Korean society (through bribery and subversion of the
orean opposition) that he considered highly productive, particu-
rly in high business circles. More recent reporting on anticorrup-
3n prosecutions in Korea over the last 2 years tend to support a
atement by a Korean businessman that the centralization of po-
:ical payments and economic decisionmaking in the Blue House
as being reinforced by the prosecution of lower level Government
ficials involved in corruption. ^^^ An executive branch official ex-

" However, on Sept. 25, 1978, Lee Hu Rak announced his candidacy for the Korean National
semWy. When asked whether Lee would assume a key post in the DRP, DRP Secretary
neral Kil Chon-Sik reportedly commented, "Who does know about the future?" Haptong wire
•vice, Sept. 29, 1978.

" "The tax investigation [of Kim Won Pil] follows a similar pattern established in the Kang
in-Pong and Lee Hak-Su cases where government efforts to uncover corrupt practices were
•lected at companies popularly thought to have close working relationships with the ROKG.
)tivation for such action stems from efforts to improve the Government image. However,
ise previous cases indicate secondary motives related to domestic politics may be involved."
partment of State cable from Seoul to Washington, February 1977.

240

pressed the opinion that by 1978 President Park had emerged J
the only key policymaker in the Korean Government.

The investigation

The KI Questionnaires ^^'*

In order to investigate political payments and related busin©
problems and practices, the subcommittee sent a questionnaire i
135 U.S. corporations doing business in or with the Republic <
Korea. Corporations were selected on the basis of one or more -
the following criteria: allegations of questionable business dealing
in Korea; participation in joint-venture, coproduction, or technic;
assistance projects in Korea; direct equity investments in Kore]
and application to the Export-Import Bank for credits or guaran
tees in connection with the export to Korea of goods or service
valued at $1 million or more in a single transaction. ^^^

The subcommittee received voluntary disclosures from 110 U.l:
corporations. Forty-eight appeared to have had economic or politj
cal problems in connection with their business in Korea. For exar
pie, some firms reported cases of stock manipulation, questionab;
contract cancellations, embezzlement by a joint-venture partne!
and apparent discrimination in favor of Japanese firms, as well i
requests for payments. The subcommittee dealt only with the prolj
lem of political payments and their foreign policy implication.

The subcommittee found that it could arrange the responses 1^
the questionnaire into three broad categories: requests for politicj,
payments; kickback and rebating arrangements with Korean puj
chases. Governmental and private; and other pa5mQents whose pu;
pose could not be determined with assurance but which seeme^
questionable. .

Political payments ^®* \

U.S. corporations reported information to the subcommittee
which indicated that persons within or closely associated with th'
Korean Government considered them as sources for political fund
Activities by Koreans which the subcommittee considered to ii'
volve political payments included direct requests for contributior
to the DRP (no requests were reported for funds for oppositio'
parties); direct requests for payments or contributions in cash or i
kind to Korean Government officials, agencies, or political fun<
raisers; and indirect pajnnents or gifts to Korean Government off
cials, agencies, or political fundraisers by commercial agents i\
representatives of a U.S. firm.

The dollar value per individual payment, request for pajonent, c
contribution in cash or in kind varied greatly. Some went to lowe
level Government officials and appeared to have been isolate!

*»* There were two versions of the questionnaire, both of which appear in appendix C-153. Tl
longer, more detailed version was sent to firms alleged to have made payments, firms wi
agents or business partners alleged to be political fundraisers, and firms having report'
questionable payments to the Securities and Exchange Commission.

»»* Aside from allegations which came from a variety of sources, the primary source materi
used in selecting corporations were a classified computer printout on commercial transactio:
with Korea provided by the U.S. Export-Import Bank; commercial reporting from the U.
Embassy in Seoul; and the various editions of the U.S. Business Directory for the Republic
Korea. '

='»* All information in this and subsequent sections derives from responses to the subcomm
tee's questionnaire or classified U.S. Government documents, unless otherwise indicated.

241

:ases involving relatively nominal amounts.^a^ in one case a firm
vas asked to contribute a number of walkie-talkies to a local police
[apartment in Korea; the firm provided $5,000 worth. Several
irms established special funds from which disbursements of this
ype were made routinely. However, not all payments to lower
evel Government officials and Korean Government agencies could
>e characterized as one-time, nominal, and of doubtful significance.
)ne firm felt compelled to terminate business in Korea after
laving had to spend the equivalent of its entire equity in Korea
5100,000) in response to demands from Korean customs and tax
fficials. It reported paying out $100,000 in ''grease money" to
Dwer Government officials, especially in customs. On one occasion

crate of lumber being cleared through customs was sold by offi-
ials for $6,000. They told the firm it would be reimbursed for the
all amount, but the firm received only $2,500. Customs explained
hat the lumber "wasn't heavy enough" and sold at a very low
rice. The same firm reported that when its tax burden increased
-cm 20-30 percent of gross sales in 1971 to 70 percent in 1974,
worean tax authorities suggested that if the firm put a tax collec-
)r on its payroll, its taxes would be much less.

Not all reported payments to tax officials appeared to have re-
ilted from demands by Korean officials. A U.S. firm stated that
payments were made [to tax officials] to avoid heavy tax penalties
or an infraction of the Korean tax laws] which could have been
ssessed. The tax officials, after receiving payment, cleared the
latter."

In cases where requests for political payments were made, in
sry few of the reported instances did they come from one of the
rincipal Korean Government fundraisers. However, Lee Hu Rak
id approach two U.S. firms for political contributions; in both
ises the firms acceded to the requests.

The more commonly reported experience was for a close asso-
ate of one of the fundraisers to approach the firm. A number of
)mpanies were asked to make payments by persons believed to be
ssociated with Lee Hu Rak, Chung II Kwon, S. K. Kim, and Kim
Dng Pil. Colt Industries was asked to contribute to the 1971 presi-
sntial elections by Mickey Kim, chief assistant to Park Chong
yu. Kim told the firm's representative that Park had asked him
) request the contribution.^** (On advice of counsel, Colt declined
) do so.) Another firm was asked to make payments to Ambassa-
or Kim Dong Jo and to the campaign of a U.S. Senator.^** Neither

**^The questionnaires did not require disclosure of payments of less than $1,000 because of the
evalence in the Far East of the practice of making small cash gifts to Government officials
d others, especially during holidays. The "relatively nominal amounts" referred to here,
erefore, are amounts at or slightly over $1,000. In some cases payments of this type were
;arly considered by the corporations as routine "public relations" expenses. See, in this regard,
e ledger sheets reflecting Gulf Oil Corp.'s so-called "Gray Fund," appendix C-158.
*»' Internal Colt Industries' documents reflecting the request and the firm's decision against
aking the contribution appear in the appendix C-150-152.

'^ In "this case the U.S. firm was requested to transfer funds representing portions of commis-
)ns due its Korean commercial agent to the Ambassador and the campaign fund of a U.S.
nator. While the firm was able to cancel the payment to Ambassador Kim by demanding
imbursement, and while the Senator's campaign committee properly returned the payment to
in recognition of campaign laws prohibiting contributions by U.S. firms, the subcommittee
IS concerned that the attempted payment to the Senator's campaign was evidence of covert
ibying efforts undertaken by Ambassador Kim Dong Jo in the United States. (See p. 47.) The
eck stub corresponding to the payment to the Senator's campaign made reference to Ambassa-
.r Kim, not the commercial agent. Therefore, the subcommittee referred this matter to the
nate Select Committee on Ethics.

242

payment was made. However, as previously noted, a third corpon
tion, Douglas Aircraft, was asked to make a payment, ostensibl
for Deputy Prime Minister Chang Key Young, in consideration <
his assistance in insuring Korean Government approval for a saj
to a Korean Government entity. The firm also paid over $70,000 1
two other Korean Government officials; this occurred short)
before the 1967 Korean elections, and the money was believed 1
have gone to the DRP.=»o«

Responses to the subcommittee's questionnaire, in conjunctici
with executive branch reporting, indicated that around the time v
the 1971 Presidential election in Korea, $8.5 million was paid t
U.S. firms for the benefit of the DRP, either directly or throug
their Korean agents or business partners. Of the $8.5 million, Gu,
Oil provided $3 million ;^°^ Caltex made available $4 million (5
million in loans and $3 million in "pre-paid fees") to its Korea
business partner;^°=* and the agents of three other U.S. firms wei
paid a total of $1.5 million in commissions less than 3 weeks befoi|
the election under circumstances which made it likely that th
I)RP was the ultimate beneficiary. Given the fact that Kim Da^
Jung lost the 1971 presidential election by less than 8 percent ('
the vote, there are serious foreign policy implications associate'
with these payments. While it is impossible to assess the degree 1
which DRP funding from U.S. sources affected the vote spread i
this or any other Korean election, nonetheless the possibility exist]
that the $8.5 million, when commingled with funds from othe
sources, accounted for the difference in the votes for Kim Dae Jue
and Park Chung Hee.^<>^ Furthermore, the figure of $8.5 millioil
only includes pa5nnents known to the subcommittee and does mil
take into account, for example, other indirect payments to the DR §!
made by joint-venture partners of American firms unknown t
their U.S. partners, the executive branch, and the subcommittet.

The subcommittee had reason to believe that not all U.S. firir
approached for political payments made them. Many more millior
of dollars were reported as having been requested but not provider
Further, according to the responses to the questionnaire, the imi
jority of U.S. firms were not directly approached. ,|

Brief descriptions of the experiences of two firms illustrate tb *
chain of events surrounding political payments by U.S. corpon
tions. The pajrments discussed in the first case related to the 196
referendum on the third-term amendment to the Korean Constiti .
tion and to the 1971 Presidential election. The payments reporter
in the second case occurred as recently as 1977, and perhaps 1971'!

Aside from showing the methods of political payments, thes 3
cases are instructive of some of the inherent difficulties in th
voluntary disclosure program set up by the SEC in 1976. With s*^
many firms participating in disclosures, the SEC's ability to revie'
thoroughly the issue of questionable overseas payments is problen
atic, and the SEC relies largely on the willingness and ability (
large corporations to investigate their own activities. The first cas

'oo Douglas Aircraft documents reflecting these transactions > appear in appendix C-139-14i

"" Senate Foreign Relations Committee, Subcommittee on Multinational Corporations, heai
ings. May 16, 1975. See appendix C-156.

='»=' See Case 1 below.

=">' Park Chung Hee actually lost the election in Seoul but made up for the difference in tl|
rural balloting. The rural vote was noted for widespread voting irregularities. See Joungwon .
Kim, op. cit., pp. 281-283.

243

vas not reported to the SEC, and the second case was investigated
)y outside counsel, pursuant to a consent decree entered into with
he SEC, who found at that time that insufficient evidence existed
o warrant the conclusion that political payments had or would be
nade.

Case No. l.—ln October 1970, Suh Jung Kwi, president of Caltex
^etroleum Co.'s Korean joint venture, Honam Oil Co., relayed to
3altex a request from the DRP for a $1 million contribution. Suh
aid the DRP needed the money to defray expenses incurred during
he 1969 referendum on the third-term amendment. The request
vas received at Caltex headquarters in New York, which told its
epresentatives in Seoul that political contributions were against
ompany policy. Honam's Korean officers then proceeded to make
n equivalent $1 million contribution in won on Honam's behalf.
A^en informed afterward of this contribution, Caltex did not
bject because responsibility for government and public relations in
[orea had been allocated to its Korean partners.

Had this contribution not been made, approximately $500,000
/ould have been available for distribution as dividends.^®* Because
'altex was to receive the first $330,000 of any dividends distributed
nd then 20 percent of the remaining dividends, this $1 million
ontribution resulted in a $364,000 loss for Caltex. This sum was
iewed by the subcommittee as an indirect contribution to the
)RP, a conclusion with which Caltex strongly disagreed.

In early 1971, Suh informed Caltex that the DRP had once again
pproached the joint venture for a $1 million contribution, this
lime for the upcoming presidential election. Because of Honam's
ixisting cash flow problems, Suh Jung Kwi sought a $1 million
)an from Caltex, making it clear the funds had to be delivered
utside Korea and in dollars. He directed Caltex to transfer the $1
lillion to a Swiss bank account. ^^^ This was done on March 15,
971.

This was not the first time a payment arranged by Suh Jung
Lwi had been sent to a Swiss account. In September 1969, Gulf Oil
lorp., following the purchase of $2 million worth of shares in a
ompany owned by Suh, transferred $200,000 of that amount to a
wiss bank account in Suh's name.3°« In that transaction, the bank
ignature card was signed by Lee Hu Rak in Suh's presence, and
he bank statements for the account were mailed to Lee's son-in-
iw, Chung Wha Sup.^^^^

Honam repaid the $1 million loan by granting Caltex a discount
m the fuel oil Caltex purchased from Honam during the period
rom late 1972 to early 1974. Honam paid no interest on the loan,
lad Honam not granted the discounts to Caltex, an additional
500,000 would have been available for distribution to the Honam

;*»* Caltex informed the subcommittee that Korean corporate income taxes were 25 percent
id that only about two-thirds of profits were distributed in dividends. These circumstances
ere taken into account in estimating the indirect contribution.

"^ The bank account was in the name of the Asia Trading Co., a Panamanian-registered tirm
vned by J. K. Suh and others. r^ icn

">* See the excerpt from Gulfs response to the KI questionnaire, appendix C- 157.
^"Ibid. Also see the bank document included in appendix C- 157 which mdicates
lat Chung Wha Sup was to receive the bank statements for what was ostensibly Suh s account.
?e Hu Rak's son confirmed to the subcommittee that Chung managed money for Lee Hu Kak.

35-508 O - 78 - 17

244

shareholders. Of that, Caltex would have received an estimate
$168,000.3°«

Thus Caltex indirectly made available through its Korean joini
venture over $500,000 to the DRP in 1970 and 1971. In spite c
Caltex's disagreement with this characterization of the transac
tions, they did agree that the contributions by Honam to the DRM
"had an economic impact on Caltex." j

Further, on two separate occasions after 1970, the Korean sharej
holders of Honam negotiated a contract with Caltex calling fo;
Caltex to make lump sum "prepaid crude brokerage fee" payment
totaling $8 million to a bank account in Switzerland.

Caltex stated this was done "in consideration of the efforts am
assistance of the [Korean] shareholders in obtaining and continuinj
to obtain additional business for Honam which to date has resultel
in an increase in the quantities of crude oil sold [to Honam]. "»<:
These payments were also to compensate the Korean shareholder!
for a decrease of their dividend rights and their surrender of thj
right to purchase a portion of Caltex's interest in Honam.

Caltex asserted this arrangement was made for proper commei!
cial reasons and was advantageous to Caltex. As in the case of th
financial transactions described earlier, Caltex stated that it was i]i
no position to know the ultimate recipient and use of these funds'

However, Caltex's Korean partner belonged to the Lucky Grou]^
which was on the list of Korean corporations seen as capable o
contributing to the DRP, which had been drawn up on Presiden
Park's orders in 1970. Because of the Lucky Group's longstandin:
ties to the DRP,^^^ and because J. K. Suh had in 1969 contribute*
$200,000 to that party, there is a very real possibility that at leas
a portion of the $8 million deposited in Switzerland benefited th^
DRP.

Case No. 2 — In the fall of 1972 a Korean businessman, Choi K
Rim, notified Foremost International that the Korean Governmen
was considering a project involving the purchase of commoditie
and services, and asked whether Foremost would be interested ii
pursuing it. Foremost sent a representative to Seoul to discuss thi
matter with Choi and officials of the Government. In a meetini
with two Foremost officials, Choi told them that "payments to th
Party of President Park" would be expected in advance.^" Fore
most informed Choi by letter that it was unwilling to proceed witl
negotiations.^" As a result, Choi subsequently indicated that i

»*• Because Caltex received its preferential dividend of $330,000 in 1973 and 1974, this latte
figure is smaller than the earlier figure of $364,000.

»~ "Agreement between Caltex and (name not supplied by Caltex) as representative for claf
A shareholders." May 5, 1970.

"o The principal power within the Lucky Group is the Koo family. One of the Koo brothers-
Ku Tae Ho— was a member of the Party Affairs Committee of the DRP from 1970 to 1973 an
chairman of the Policy Committee from 1971 to 1972. In 1973 Ku Tae Ho was a cabinet officii
with the rank of Minister without Portfolio. From 1973 to the present he has been vie
chairman of the Policy Committee of the Yujeong-hoe (a fraternity of legislators selected to th !
National Assembly by President Park), and since 1976 concurrently vice speaker of the Natione
Assembly.

"'Subcommittee staff interview, Aug. 8, 1978; memorandum from R. H. Baum to C. I
Loveland, Dec. 1, 1972, see appendix C-95; foremost response to the KI questionnaire, Sept. 1,
1978.

"» Letter from E. G. de la Ossa to Ki Rim Choi, Nov. 6, 1972; see appendix C-93.

245

ocal group" would handle the arrangements for payment of the
ecessary political funds.^"

The local group was Apex International,^!* an affiliate of a U.S.
)mpany active in Korea as a U.S. military contractor. Choi ar-
mged for Apex to work on the project as a subcontractor to
oremost in order to facilitate the disbursement of the political
mds.^*!^ Documents indicated that Apex was to pass through
500,000 from Foremost to Choi, under Apex's proposed contract
ith Foremost.3!« Choi would then presumably pass this money on
> the DRP.

At some point after the initial discussions between Choi and
oremost, another Korean businessman— Um Ick Ho — entered into
le negotiations. Um appeared to Foremost representatives to be
hoi's "boss." He was executive vice president of a U.S. joint-
■^nture in Korea and a close friend of Tae Wan Son, Deputy Prime
Minister and head of the Economic Planning Board."' At a meet-
g with Choi and Foremost officials, Um spoke of the Korean
■nse of ethics and suggested that political contributions were not
•nsidered immoral in Korea.^^^

, Meanwhile, Foremost had concluded that it could not proceed on
te supply contract without a feasibility study to determine pre-
jSely what supplies were needed. The original $15 million supply
•ntract was set aside in favor of a contract for a $200,000 feasibil-
y study, removing the basis for the arrangement involving Apex,
owever. Apex continued to be involved because of its relationship
■ Choi and because it desired to participate in the eventual supply
vntract.3i«

The Korean Government, Choi, and Um expected that Foremost
'puld handle the general supply contract at the conclusion of the
asibility study. However, when the time came in 1974 for negotia-
.)ns. Foremost decided it did not have the necessary expertise nor
e willingness to take on substantial liability for warranties and
iiarantees under the general supply contract. Accordingly, Fore-
ost proposed instead a ''dual contract" approach which it hoped
Duld eliminate or minimize these problems.^^"
Foremost 's decision was not well-received. At a discussion in
ISoul, its representatives were threatened by Um, as reported to
;)remost's headquarters in a letter of June 20, 1974:^21

^ Letter from R. H. Baum to C F. Loveland, Dec. 1, 1972; see appendix C-95; memorandum
1 m J. F. Rebosio to R. H. Baum, Nov. 15, 1972; see appendix C-94.
'« Subcommittee staff interview, Aug. 21, 1978. Apex "took over" from Intercon Development

< , like Apex an affiliate of Fischer Engineering & Maintenance Co. (FEMCO). The principals
1 Intercon were also the principals in Ai)ex.

•'* Apex disputes this characterization; see appendix C-137. However, see especially the foUow-
i-: letter from K. R. Choi to E. G. de la Ossa, Dec. 9, 1972 (appendix C-96); memo for the
1 ord, D. F. Morse, Intercon, Dec. 15, 1972 (appendix C-99); letter from E. G. de la Ossa to
jercoiT, Dec. 12, 1972 (appendix C-97); letter from R. H. Baum to J. F. Rebosio, Dec. 14, 19/2
( pendix, C-98).

" See memo for the record, D. F. Morse, Intercon, Dec. 15, 1972 (appendix, C-99).

■' Foremost response to the KI questionnaire, Sept. 1, 1978; letter from Burton Rockwell to
].ssell Baum, May 14. 1974 (appendix, C-109); memo from R. H. Baum to E. G. de la Ossa, Mar.
: 1973 (appendix C-100).

."Foremost response to the KI questionnaire, Sept. 1, 1978.

'•Interoffice correspondence from C. Y. Catibayan to Don Morse, Mar. 23, 1973 (appendix

< 102); interoffice correspondence from Don Morse to Cesar Catibayan, June o, 1973 (appendix,
( 105).

» Memo from R. H. Baum to N. J. Denaut, June 20, 1974 (appendix C-112).
" Ibid. See also Burton Rockwell to Russell Baum, Sept. 13, 1974 (appendix C-115) and letter
Im Rockwell to Baum, May 14, 1974 (appendix C-109).

246

• * • Throughout all of the discussions regarding the project, a very stroi
politically oriented group of influential Koreans has been working unofficially ^
insure [Foremost's] receiving the general supply contract for commodities and se'
vices. We have been given to understand their influence extends downward fro'
the upper-most levels of the executive branch of the Government. Personal conve
sations * * * have indicated that one of the most influential of this group hj
strongly intimated that [Foremost's] effectiveness in its present activities in Kon
and its potential for expanding its role in other commercial ventures could be vei
seriously hampered or curtailed should we not make every effort to negotiate •
supply contract with * ' * the Korean Government.

When the Export-Import Bank to whom Foremost had applie<
rejected the proposal, Foremost sought out other companies thj
might be interested in completing the project.^"

Foremost was successful in interesting American Health Facil
ties International (AHFI). According to Foremost officials, the |
informed AHFI that political contributions would be expected an |
were a condition to obtaining the contract.^^a p^gi; ^j^^j preser
employees of AHFI have denied this.^^* In any case, Foremos
arranged meetings between AHFI officials and the Korean con
mercial agents— Choi and Um— who Foremost understood repn«
sented the DRP on the matter of political payments. I

In December 1974, AHFI agreed to hire Choi as its agent an
Apex as prime subcontractor. In addition, Choi and Apex entere
into a separate contract in connection with the supply contrac
under which Choi also became the agent for Apex. In this wa}
Choi could expect commissions from both Apex and AHFI amoun-
ing to roughly $1.75 million.

Documents subpenaed by the subcommittee indicated that Apej
too, was aware of the necessity for payments from the very begir
ning of negotiations in 1972. Apex was concerned that its only rol
in the project would be that of conduit for funds to Choi.^^^ I:
addition. Apex was aware that Choi's political funds were to b
partly shared with a Dr. Hong Ki Kim, who, as head of the Seoii
National University Hospital, was a Government official.^^® Th
hospital was the entity purchasing the commodities and service
from Foremost and AHFI. In fact. Apex had already paid Dr. Kir
$1,500 to "defray his expenses" for a trip to the United States t
negotiate with Foremost on behalf of the Korean Government.'- ,
Apex had committed to writing in February 1973 the covert rol
that Dr. Kim was to play, using the code names Charlie and Pete
for Choi and Dr. Kim:

* * * I asked [a Foremost official] if he required our assistance at any stage (
their * * * survey and he said no, that they would be using hospital personnel onl
but that their quote, naturally, includes arrangements for political consideration s
we might be called upon for disbursements of same . . . Will have to be sure Charli
and Peter see to it that we have to be included one way or other or they may not b
able to get their part of the deal.^"

'" Letter from Burton Rockwell to NeU Denaut, Oct. 24, 1974 (appendix C-118).

"'Subcommittee staff interview, Aug 8, 1978.

'^♦Subcommittee staff interview, Apr. 17, 1978; letter from Leonard Ring and Associates to th
subcommittee, Oct. 3, 1978. See appendix C-138.

'" Interoffice correspondence from Don Morse to Cesar Catibayan, June 5, 1973, appendi
C-103; interoffice correspondence from Catibayan to Morse, June 16, 1973, appendix C-10

"• Apex disputes this statement (letter from Donald Morse to the subcommittee, Oct. 2, 197
appendix C-137.

'" Interoffice correspondence, Cesar Catibayan to Don Morse, Sept. 25, 1972, appendix C-9:
See, also, interoffice correspondence, Catibayan to Morse, June 27, 1973, appendix C-105, whic
refers to "Charlie's group."

»" Interoffice correspondence, Don Morse to Cesar Catibayan, Feb. 22, 1973, appendix C-10

247

There was reason to believe that from early on in its involve-
ent with the hospital project, certain AHFI officials knew that
lyments to Korean Government officials might be made out of the
amissions it would be paying to Choi and to Apex, although the
ddence supporting this conclusion is strongly disputed by AHFI.
s noted previously, Foremost representatives said they had told
HFI, and at the time of the initial discussions between AHFI and
Dremost, one of AHFFs officials wrote that a Foremost consultant
id emphasized that "certain local contingencies of 10 percent of
e contract price were provided for by FEMCO ^^s which was to be
e installation subcontractor." ^ao while the meaning of this pas-
,.ge is now disputed by the parties to the document, other informa-
m strongly suggested that this was a reference to a pricing
ntingency of 10 percent for Choi that was included in the prices
(awn up by Apex and Foremost for the hospital as part of the
:asibility study."* This pricing contingency came to be known as
e "J-factor" and was referred to in a letter of May 14, 1975, from
.3ex to AHFI."2 AHFI officials have also disputed the meaning of
e "J-factor," describing it as a reference to Annex J of the March
75 contract between the hospital and AHFI.^^^ However, that
irm had been in use almost a year prior to the March 1975
(ntract.^^* Further, with regard to AHFFs knowledge that pay-
ments would flow from the ' J-factor" to Korean Government offi-
(ils, AHFI received a telex from Choi in March 1975 regarding a
] oposed reduction in the contract price, in which Choi wrote: "^

' * ' I strongly suggest you reduce total price bv $500,000, of which reduction 50
I'cent shall be from our portion and 50 percent from your portion by cable to Dr.
ini. Stop. Your cable must say you reduc^ total price only upon receipt of Mr.
( oi's advice in order to protect Dr. Kim's j)ortion and for project to proceed

m. Stop. Your cable must say you reduced total price only upon receipt of Mr.
oi's ad
i oothly.

'lough somewhat ambiguous, Choi seems to be communicating
^ th AHFI about payments. Furthermore, a former AHFI official
i formed the subcommittee that he was told by Apex that the "J-
Ictor" referred to "juice," and he and other AHFI officials were
i formed by Choi subsequently that Choi had obligations to pay
JDrean Government officials out of his commissions.^^^
Statements and documents seen by the subcommittee show that
jyments to Korean Government officials were made out of com-
lissions paid by AHFI or its subcontractor Apex. A known pay-

■"•AHFI would appear to have confused FEMCO with Apex, a natural confusion given the
i srchangeability of Apex and FEMCO personnel. See the memo for the record signed in
Irse's name by Cesar Catibayan and mailed to Choi Ki Rim, Dec. 5, 1973, appendix C-106.

'« Memorandum from John C. Hough to Kenneth C. Wright, Nov. 11, 1974, appendix C-120.

"The 10 percent "contingency" is the subject of a memo for the record signed by Cesar
( ibayan in Don Morse's name and addressed to Choi Ki Rim, Dec. 5, 1973, appendix C-106.
1« than a month later, Morse wrote Lim that Foremost had included 10 percent for Choi;
i sroffice correspondence, Jan. 4, 1974, appendix C-105.

'» Letter from Don Morse to Kenneth Wright and Richard Roberg, May 14, 1975, appendix
( 23.

"Subcommittee staff interview with Kenneth Wright, Apr. 17, 1978; memorandum from
I hard Roberg and Kenneth Wright to Ron Scharf, Sept. 16, 1975, appendix C-125; memoran-
c n to annex J, Mar. 7, 1975.

'- See letters from Don Morse to Burton Rockwell: Apr. 30, 1974, June 14, 1974, June 24, 1974,
el June 28, 1974, appendix C-108, 110, 113, 114; and interoffice correspondence, Don Morse to
(A. Lim, June 19, 1974 (appendix C-111) which makes clear that the J-factor is Choi s
cimission.

" Copy of cable, Choi to Kenneth Wright, Mar. 3, 1975, appendix C-121.

'•Subcommittee staff interview with David Edwards, Mar. 4, 1978; subcommittee staff inter-
\Ar with Kenneth Wright regarding statements made to Thomas Mitchell by Choi, Apr. 17,

1 o.

248

ment was made to Dr. Kim;^" another was for the benefit of
Government official with the Economic Planning Board.''* In addi
tion, over $500,000 in other disbursements by Choi had to be cob
sidered questionable. These moneys were commissions which, upoii
receipt from AHFI, were laundered by Choi through the banl^
account of an Apex official to third parties in Korea and th I
United States, or were withdrawn from Choi's account in larg
amounts of cash. At least $30,000 appeared to have been laundere*
for the benefit of Um Ick Ho; $180,000 went to an individual whos
name could not be deciphered from the check he received fror
Choi; and another $330,000 was laundered through an Apex off
cial's bank account for one Koo Bum. With regard to Koo Bum, th
subcommittee learned that Choi is related by marriage to the Ko
family which controls the Lucky Group of companies. Koo Bum i
the son of the founder of the Lucky Group, Koo Chong Hoe. Two c
Koo Bum's uncles are DRP National Assemblymen, one of whom i
a leading figure in the party. While the subcommittee gathered n^
evidence that moneys were paid to the DRP, the method by whicl
Choi drew down the bank accounts containing his commission
made such pa3anents entirely possible.''*

Kickback and rebating arrangements with Korean purchasers

Responses to the subcommittee's questionnaire showed that kick
backs and rebates by U.S. corporations to Korean purchasers o
commodities and services were prevalent. Such practices seemed h
be particularly common to certain industries, notably, aircraft
grain, shipping, wig, and petroleum-related products and servio
industries. In some cases, the kickbacks or rebates went to tb
employees or owners of private Korean firms, in other cases i^
Korean Government agencies or officials.

With regard to the latter, there is a serious question as to wheth
er such payments constitute extortion by Government officials o
bribery of Government officials to facilitate sales. There is evideno
which suggested that in one arrangement KORVAC, the Koreai
distributor of a Sperry Rand subsidiary, may have made a paymen
to a Korean customer in the amount of $50,000 in connection witl
lease of equipment. The customer was the KCIA.'*° Two otha
firms — Caltex and Gulf — provided rebates on sales of fuel oil sol(
to the Korean Ministry of National Defense. Gulf characterized th(
payment as rebates or kickbacks, Caltex as "volume discounts." I
was difficult to understand Caltex's characterization, and a descrip|
tion of the arrangement makes it clear why.

The maximum price allowable for petroleum and petrochemica
products sold in Korea is controlled by the Korean Government
According to Gulf, "the Government endeavors to maintain thes(
prices at low levels in order to provide energy and chemical feed

"' Photostat of a canceled check to Dr. Hong Ki Kim, appendix C-129.

""The Subcommittee staff interviewed this official on Oct. 19, 1978, and was told that thi
transfer was a foreign exchange transaction unrelated to the hospital project. Whether Choi wSj
actually reimbursed in won for the dollars he provided to this official could not be determine<

""On the Koo family, see footnote 310 above. The laundering practice is described in thi
deposition of George Krause, July 31, 1978, appendix C-135.

'♦"Sperry Rand informed the subcommittee that "no proof has been established that thi
payment was ever actually made." However, the subcommittee received allegations concernin
this payment, not only through Sperry Rand's response to the questionnaire, but from othe'
sources as well.

249

scks to Korean industry and fuels to the Korean public at the
rnimum possible cost." However, in late 1970 officials of the
Anistry of National Defense requested that both Gulf and Caltex's
trean joint ventures increase the price at which they offered to
s«l petroleum products to the Ministry of National Defense. The
dference between the Gulf and Caltex offered price and the
h her final selling price was to be rebated directly to the Ministry.
T e Ministry stated that the funds would be used for housing
sdiers and their families and that all companies in Korea had
b^n requested to make the same arrangements and were comply-
ii. After initially resisting this procedure, both Caltex and Gulf
v^nt along with the arrangements. The subcommittee estimated
tilt these rebates amounted to approximately $750,000 a year from
1: 1 to 1975, when the practice was in force. Because the prices
:]irged by Caltex and Gulf were higher, not lower, than the prices
tly were willing to charge, these transactions cannot be consid-
Bid "discounts."

n addition, these arrangements were illegal under Korean
l£',3" regardless of the fact that officials in the Ministry of Na-
tiial Defense were instrumental in setting them up. The effect
W.5 that Korean defense budget appropriations included items in-
Qed above their actual costs. Furthermore, whatever uses were
ir de of the funds rebated to the MND had not been authorized by
tl Korean National Assembly, undermining its constitutional
fi ctions. Finally, the transactions raise serious questions for both
tl Korean National Assembly and U.S. military planners about
tl actual level of defense spending by the Korean Government.

'he following description is of another arrangement for pay-
rrats, made available, in this case, in connection with sales of
ccon by Hohenberg Brothers Co. International, a subsidiary of
Cgill Inc., to Korean purchasers. What Cargill assumed to be a
siple accommodation payment desired by the Korean purchaser
fc its own purposes was potentially far more significant when
phed in the context of other facts apparently not known to Car-

'he arrangement involved a Korean mill which used a purchas-
ir agent located in New York. Cargill understood there was a
'rong connection" and ''perhaps some common directors" be-
t\ en the Korean mill and the New York purchasing agent. When
C. gill sold cotton to the mill, the agent would direct Cargill in the
li)ursement of the commissions owed it. Typically, Cargill would
pr a percentage to the agent, a percentage directly to the mill,
ail a small percentage to ''another related corporation located in
tt United States." Cargill emphasized that neither the Korean
G^ernment nor any Korean political party was to its knowledge
m Dived in the arrangement. "The Korean mill was the moving
pjty in seeking the accommodation arrangement and * * * there
w e no corrupt or political overtones, but merely commercial ones,
tx:he arrangement * * *." Further, the arrangement "* * * did not
in Dive overpricings as such although it is possible that the same

Even if this were not interpreted as a bribe or extortion under Korean law, it would appear
to Dlate article 315 of the Criminal Code. Article 315 concerns interference with the impartial
CO: act of auctions and bids.

250

result was accomplished by the level of and method of establishir
commissions by the Korean mill and its purchasing agent."

In its response to the subcommittee's questionnaire, Cargill alj
made some general observations. Overpricing "is unfortunately
common request in many parts of the world and an unwillingne
to accommodate these requests will often result in a flat refusal I
the buyer to do business. The arrangements relating to overpri
ing had aspects which Cargill believed might have seemed uncor
mon in some parts of the world but were not uncommon in Kon
in the area of cotton buying and selling. According to Cargi;

• * * The request to overprice cotton would, as a matter of mechanics, often
conveyed to the U.S. seller by the Korean purchasing agent but it is the so)
impression of the U.S. merchants involved that these requests actually emanat
from the buying mills who initiated them, acquiesced in them and fully participat
in the proceeds of overpricing whether these proceeds were returned to Korea,
the form of commissions, or were directed to be paid elsewhere.

It seemed that the agent and buying mill were ofter closely allied-
"the agent, in fact, being an alter ego for the mill." Cargill unde
stood from this that the transactions were "accommodation pa
ments" to the mill owners, who were really behind them.

The subcommittee verified that the New York-based purchasir
agent— Daihan Nongsan Corp. of America — did in fact have
direct proprietary connection with the Korean mill — Daihan Non
san Co. Ltd. — as the corporation assumed. Thus, commission pa
ments to the agent, as well as the payments directly to the mi:
would fall under the subcommittee's classification of rebates (
kickbacks.

Given the information Cargill had available, it might well ha^
assumed the arrangement to be strictly commercial, without polil
cal overtones. Indeed, Cargill would not appear to have been in
position to believe otherwise. However, the subcommittee hi
reason to doubt that characterization. According to executi^
branch reporting, Daihan Nongsan was previously under the infl
ence and control of KCIA director Lee Hu Rak. The subcommitt(
had other information indicating a connection with the KCL
Daihan Nongsan was a contributor to a KCIA front for academ
research— the Research Institute on Korean Affairs.^*^^ Furthe
more, during the early 1970's, under pressure from Lee Hu Re
and S. K. Kim, Daihan Nongsan was used to launder over $1
million in rice commissions received for the benefit of Tongsi
Park.

Questionable payments

A number of corporations reported disbursements which (1) th(
identified as possibly having been political payments or (2) did n
identify but which could be construed as such. For example, the:
was the $8 million disbursed by Caltex in "prepaid brokerage feei
and the $500,000 in AHFI and Apex commissions laundered I
Choi Ki Rim. To these illustrations of questionable paymen
should be added the following:

(1) In 1969, GATX-Fuller Ltd., a British subsidiary of GAT'
Corp., became a party to a consortium headed by the French fir
Five-Lilles-Cail. At one point, Five-Lilles-Cail negotiated an agent

»«See "Part C-V: Educational, Informational, and Cultural Activities," pp. 290-293.

251

rreement with United Development Inc. (UDI) in connection with
sale of equipment to Korea. UDI is a company registered in
anama and owned by Shoul Eisenberg. According to GATX, Five-
iUes-Cail notified GATX-Fuller that the consortium would be
sing UDI and would provide compensation in the form of a com-
ission equivalent to 25 percent of the contract. GATX informed
le subcommittee that neither it nor its subsidiary questioned the
gh rate.

GATX-Fuller then issued two promissory notes (both dated
arch 24, 1970) to UDI, the total of which equalled roughly 25
ircent of the contract. One note directed that 142,308 pounds
erling (approximately equivalent to $341,500) be paid into a UDI
:count at a British bank on February 23, 1971, which was 2
onths before the Korean presidential election.
While the timing of the payment with respect to the Korean
I actions may have been coincidental, as previously noted the sub-
( mmittee received a considerable amount of information from the
cecutive branch, Korean businessmen, and former Korean Gov-
• nment officials alleging that Eisenberg had contributed substan-
lil funds over a period of years to the highest ranking officials of
le Korean Government. The executive branch received informa-
ipn in 1970 that Eisenberg had a reputation among the Korean
lisiness community for obtaining contracts by paying commissions
( up to 25 percent to influential Blue House staff members. Other
1 ports over a period of years alleged payments of over $5 million
i loans, gifts, and kickbacks to or for the DRP and Korean offi-
(ils. In any event, the 25-percent commission paid to UDI by
(\TX-Fuller on a multi-million dollar contract is extraordinarily
]gh, sufficiently so to raise questions.

(2) Union Oil Co. of California reported that "from time to time
lans, advances, and other payments have been made to C. H. Kim,
i.e owner of 50 percent of the common stock" of Union Oil's joint
'nture, Kyung In Energy Co., Ltd. The subcommittee received
i formation indicating that C. H. Kim (Kim Chong Hee, also
]iown as Dynamite Kim) was a close friend and relative by mar-
]iige of Lee Hu Rak. In the latter part of 1973 and early 1974, Kim
<iiong Hee interceded with Park Chong Kyu and with President
]irk to allow Lee Hu Rak to return to Korea from exile abroad
lid to guarantee he would not be harmed.

The subcommittee also received information which suggested
lat Kim was more than a good friend of KCIA Director Lee. Kim
hong Hee, his brother Kim Chong Shik, and his company, Korea
Icplosives, apparently participated in KCIA operations in the
United States during Lee's tenure as director. Kim Chong Shik was
istrumentai in getting Lee Hu Rak's son-in-law, former KCIA
icond bureau chief, Chung Wha Sup, nominated to the board of
le Korean Association of Southern California, which at the time
^is the largest Korean residents' association in the United States.
].m and Chung were successful in ousting a critic of the Park
bvernment from the chairmanship of the association. 3*=* This kind
( activity was embodied in the 1973 KCIA-Korean Foreign Minis-
yy 'Tlan for Properly Guiding Korean Residents." ^^^ Kim Chong

" Subcommittee staff interview.

,**See "Part C-D: Intelligence Activities and Plans, p. 98.

252

Hee's brother was also active at board meetings of the Korea
American Political Association— an organization in which tb
Moon Organization and Korean Government officials were heavii
involved personally and financially. ^^^ In addition, $20,000 was ca:
tributed in the name of Korea Explosives to the KCIA froj
RIKA.3*«

The subcommittee was unable to determine whether any of tl
loans and other payments made by Union Oil to Kim Chong He
and his companies were used as political funds. Union Oil did n-
respond to the questionnaire with respect to Kim Chong Hee, £
though it indicated that Kim and his companies may have bee
"agents, consultants, or representatives" within the meaning '
question 4 of the KI questionnaire.^*^ Union Oil explained that Kiij
and his companies were not a ''third party nonparticipant," b«
rather a principal of the joint venture. To the corporation, tB
phrase "agent, consultant, or representative" had "unfavorab
overtones that are not appropriate for a man of Kim's stature j
an industrial leader in Korea." With due respect for Kim
stature, a question still arose about how the payments made l\
Union Oil to Kim and his companies were used in view of tl
association of Kim and his companies with and in support of KCI
operations in the United States.

Responses of the U.S. Government to political payments

As has been discussed in the historical background to this se
tion, after the 1961 coup the United States insisted that tl
Korean Government carry out a systematic program to rid tly
bureaucracy of corruption. It backed that stand by threatening 11
withhold $28 million in promised assistance. Although the militai'*'
regime had instituted an anticorruption program, embassy officia
soon became aware that corruption was widespread under the ne
Government. In 1963, after some flagrant incidents involving tl
KCIA, they raised the issue directly with Park Chung Hee bi
apparently did not do more than make the Korean Governmei
aware of their concern.

There has been an allegation by Herbert Goodman, an executi\
of Gulf Oil Corp., made in a letter written by an attorney in 197^
that in 1963 the U.S. Government actually encouraged politic*
payments to support the impending election. Goodman now denif
the allegation, and the subcommittee was unable to substantial
the information from other sources. Nevertheless, it believed tt
matter to be important enough to warrant mentioning.

In the 1975 letter, Goodman recounted the incident to the lawyt
who wrote: ^*®

While on assignment for Gulf in Korea in 1966,"» [Goodman] received overtur
for a political contribution from a Lee Hu Rak, who as Presidential First Secretar
functioned as "General Park's Haldeman." This request was precipitated by oi

»«See "Part C-V: Educational, Informational, and Cultural Activities, pp. 348-351."

'♦• Ibid.

"^Question 4 reads: "Please list all consultants, agents, representatives, and subagents thei
of, who were employed by the corporation for business in or with the Republic of Koree r

'*• Letter from John Logan O'Donnell (attorney for W. L. Henry of Gulf Oil Corp.) to John I
McCloy (chairman, Gulf Oil Corp.) Special Review Committee, Sept. 19, 1975. . ' |

'*" Although Goodmsm states that he is describing events leading up to the 1967 election, it
apparent from the details that he is referring to the 1963 election. Goodman was in South Kor
prior to both of those elections. See footnote 259 above.

253

6 te Department's insistence that the Korean regime legitimize itself by holding a
g eral election. Korea had never before had an electoral campaign, much less one
nieled along American lines, and its officials were uncertain how to find an
0 K)nent to run against General Park, and, more importantly, how to finance such
aelection.

Ir. Goodman noted that the first difficulty was solved when a courtly old gentle-
nn was prevailed upon to lend his name to the opposition party. The second
p blem was more substantial; at the suggestion of our State Department, however,
tl campaign was to be financed by "private contributions" in the same way that
0 domestic political parties are supported. As a result, the Gulf Oil Corp., the
U^est investor in Korea, was "requested" to make a $1 million contribution to
Gieral Park's election fund. The contribution was to be in cash, transferred
tl 3Ugh a Swiss bank. The tenor of the "solicitation" and the manner of delivery do
ii sed parallel our own domestic election practices.

Frther details were contained in a memorandum on an interview
Codman had with the Gulf Oil Corp. Special Review Commit-

t< : ''^'^

fter the overthrow of the government by General Park, a great deal of pressure
w placed by the U.S. Government on the then Korean officials, mainly military
ol:ers, leading the country to hold an election "to legitimize" themselves. Accord-
ir to Goodman, the officials were finally convinced and a team of U.S. advisers
we sent to Korea to tell them how to run an election. Goodman stated that in
8( .6 ways the operation was a bit of a farce since people were standing for election
w lout even realizing it and that a great deal of the effort being made was merely
tc atisfy the United States and to avoid loss of financial and military aid from the
U ted States were the election to be held [sic]. It became obvious that General
P k and his fellow officers would need money to run an American-type election
a] [again, according to Goodman], the U.S. advisers suggested that they get money
frn the various corporations (including the United States) operating in the subject
antry. At this point Gulf was the only substantial foreign investor and Goodman
d(5 not believe that the $4 million was a particularly large contribution for the
ti 3 period involved.

n the later 1960's, while the U.S. Government was well aware of
t]( general problems of corruption in the Korean Government, it
\S3 unclear whether the Government was aware of the issue of
operate payments by U.S. firms or their extent, especially in
Oiinection with the 1967 election. For example, in 1968 State De-
p-tment officials were concerned over the potential implications
0 :he operations of businesses of a third country in Korea and the
p valence of corporate payments.

* * businessmen [of the third country] are deeply involved in playing the Korean
cc uption game and paying off various political figures. If unchecked or uncon-
tiled, this might lead to their using funds to bring about the election to office of
p{:icular individuals whose devotion to sound economic development or Korean
wtare may be less than their appetite for bribes. An even more dangerous conse-
qi ace of bribery [by those businessmen] would be a great public scandal which
w Id lead to political turmoil and possibly the fall of the Government.'"

t is curious that these officials made no mention of American
b5inessmen being either directly or indirectly drawn into ''the
Krean corruption game" or of that threat, given that these same
o:cials were then urging greater U.S. private investment in
Krea.-Even more interesting, they seemed to view the problem in
t<ms of bribery rather than extortion, whereas the investigation
rvealed that the latter was far more prevalent. In addition, they
ii icated a matter-of-fact attitude toward the possibility of election
p^offs, expressing concern not so much over the payments them-

Memorandum to file, Gulf Review Committee, interview of Herbert Goodman, May 29, 1975.
Declassified excerpt from a classified U.S. Government document.

254

selves but over whom they would support and the threat that
scandal could topple the Government.

The subcommittee found no evidence that the executive bran|
made any formal representations to the Korean Government
took other steps concerning the corruption from the time of R
Jong Pil's removal in 1964 to 1971. In August of that year, Phi
Habib became Ambassador, and he took a firm stand against t
activities of both Tongsun Park and Shoul Eisenberg throughc
his ambassadorship. He warned visiting congressional delegatio'
and corporations about dealing with those two and wrote numero'
memos to State in Washington, reporting on their activities a
requesting action against them.

There were indications that Habib and the U.S. Governme
were aware of corrupt activities involving more than those t^
commercial agents.

From time to time in the early 70's, representatives of [our] company attenoj
luncheons at the U.S. Embassy in Seoul, Korea, during which time representati'i
of other companies doing business in Korea complained to Ambassador Habib a
members of the staff about the general problem of the need to make politi'
contributions in Korea in order to do business in that country.^*"

According to a State Department official, the meetings beg;
probably some time around May 1972 when two American bu
nessmen who represented smaller firms were invited to speak at
meeting of junior embassy staff. ^^^ The businessmen described tl
payoffs that had to be made, how the funds were used, and tJ
channels through which *'the squeeze" was put on American bu
nesses. They noted how widespread the problem was and he
much pressure they faced. American firms had to haggle over tJ
amount of the payoff with whomever was making trouble for thei
whether it was the Korean tax authorities or the Ministry
Commerce and Industry. However, for the most part, the Sta
Department official commented, U.S. firms did not complain I:
cause they did not think anything could be done and they we
still making profits.

The official characterized the attitude of other junior embas
officers. They were concerned that the Japanese were * 'better"
making payments and that American business was "handicapp
because of its squeamishness about making payments." ^^*

By the mid-1970's, the problem of kickback and rebating arrang
ments that Korean firms and the Government were pressing (
foreign companies whose products they were purchasing had al
come to the embassy's attention, along with other irregular
suspicious incidents like the Deak and Company "black-bag" op(
ations, rigging of competitive bidding procedures used in milita'
procurement, and improper transactions in relation to Public La
480. An embassy officer stated that U.S. businessmen occasional'
came to the Embassy seeking advice on their problems, explainii
that they were attempting to sell products to Korean firms b
were running into competition from the Japanese or other source
Their Korean commercial agents told them that such probler
could be overcome if a particular person on the Korean firm we

»»» Letter from a U.S. corporation to the subcommittee, Aug. 28, 1978.
»»» Subcommittee staff interview, Nov. 7, 1977.
"* Ibid.

255

'iken care of." The embassy officer noted in relation to these
' usiness to business" payoffs that ''State danced around the prob-
In," telling the businessmen they should not make the payments
ht, at the same time, they should expect their commercial agents
t do what was necessary to conduct business in Korea.

n 1975, the extent and nature of political payments became
pblic when the Securities and Exchange Commission and the
Cngress became involved in assessing the extent of the problem of
o^rseas payments and its implications for stockholders and Ameri-
ci foreign policy. Since 1975, the executive branch has repeatedly
diounced political payments in the strongest terms,^" and both
t? executive branch and the Congress supported passage of the
f reign Corrupt Practices Act which was signed into law in Decem-
b' 1977. The Government also proceeded against several firms.
Ispite this, there were indications that the Government has not
riponded as fully as it might. While in 1977 embassy officials told
ti subcommittee staff that there was no longer a problem with
rjard to political payments in Korea, several American business-
Dn alleged that the problem had ameliorated significantly but
hi not completely disappear ed.^" Recently, the administration
i] plied that it viewed the Foreign Corrupt Practices Act as a
d incentive to U.S. business abroad and made no mention of the
s<ious foreign policy concerns associated with these practices. ^^^

Ciclusion

is noted, there has been considerable public debate over the
iiie of payments made by American corporations to officials or
amts of foreign governments. The very substantial payments
nde by Lockheed, Exxon, and Gulf Oil created a sensation be-
c ise of their size and because they went to persons at the highest
1( els of foreign governments. Public disclosure of these payments
Gated political turmoil in Japan, Italy, and the Netherlands.
(Iformation about the Gulf Oil payments to Korean political fig-
U's and the Democratic Republican Party has never been made
polic in Korea.)

/oluntary disclosures made under the program instituted by the
SO revealed that among American companies, the practice of
n king payments abroad was widespread and that the types and
SBs of payments varied. Some were made to facilitate day-to-day
cnpany operations, while others, especially the more substantial
p/ments, were made to obtain major sales contracts, as contribu-
tias to political parties, to enrich specific officials, or to support
Gvernment operations in general or those of specific agencies.

klembers of the business community have defended these pay-
nnts on grounds that demands are frequent and persistent and
tilt unless they make the payments, they will lose their business
t<,Dther firms willing to make them. They argue that payments are
"ilturally acceptable," even though sometimes illegal, and are

See, for example, House Committee on Interstate and Foreign Ck>mmerce, Subcommittee on
Ojumer Protection and Finance, Hearings, Apr. 21, 1977.

In fact, during the subcommittee staffs investigative mission to Japan and Korea, an
A ;rican businessman told the staff that he had been approached for a political payment while
in orea the week before. , _,

See the President's statement on exports of Sept. 26, 1978 and a related Washmgton Post
ai;le, appendix C- 155.

256

rooted in the social mores of societies very different from that
the United States. One writer summarized this argument:

The reasons multinationals must do business amid a profusion of outstretch
hands go deep into the history and structure of the lands in which they operate,
much of Asia and Africa, the market economy as we know it, in which the sale
goods and services is governed by price and quality competition, never has exist*!
What has developed in its stead are intricate tribal and oligarchic arrangements!
social connections, family relations and reciprocal obligations, lubricated by maj
forms of tribute, including currency."'

In the case of Korea, one firm justified its payments to tl
Democratic Republican Party as "contributions to democracy."

Generally, defenders of the practice of making payments do n
distinguish between those made at the lower levels of foreign b
reaucracies to expedite routine operations and the larger paymen
they believed were expected for major undertakings such as tl
construction of power plants, arms sales, and the acquisition of c
exploration and mining rights. They also do not address the fa
that payments by American multinationals occur in Europe wheji
social mores do not support bribery of public officials, which
considered politically offensive and subversive of the free ente
prise system and democratic government.

The most widespread argument in defense of the payments
that they facilitate American business abroad — that withoi
making payments, American firms will not be able to compete. Tl
business community has pointed out that a substantial percentaj
of U.S. GNP is generated from sales and business abroad. Son
businessmen have suggested that enforcement of the Foreign Co
rupt Practices Act and SEC disclosure requirements will reduce tl
effectiveness of American marketing and that ultimately it is tl
balance of payments which will be affected.

While recognizing these arguments, the subcommittee conclude
that in fact there was and is little justification for U.S. Goven
ment tolerance of political payments or commercial practice
which perhaps inadvertently facilitate them. Since the subcommi
tee was authorized to investigate political payments by U.S. fim
only, it was unable to judge whether foreign competition fun
tioned as a factor compelling payments.^*^ However, the Korea
case demonstrates clearly that the advantage of facilitating U.I
business abroad can also entail the disadvantage of corruptir
foreign democratic institutions.^^®

With respect to the arguments of cultural acceptability, the sui
committee noted that many of the practices were illegal und(
Korean law and that both the recipients and the corporatior
conducted their transactions so as to hide them. Recipients i
Korea generally insisted on payments in cash or into bank a
counts outside the country. The companies making them used a
counting techniques that obscured the nature of the payments froi
internal auditors; these included ''off the books" accounts, misr

"• Milton Gwertzman, "Is Bribery Defensible?" New York Times Magazine, Oct. 5, 1975. S
appendix C-163.

"• To accurately assess the question of necessity would require an investigation of allegatio
of payments by foreign competitors; this is a matter outside the mandated responsibility of t
subcommittee.

»•» See, especially, the previous analysis of the potential impact of political payments on t
1971 Korean presidential elections, p. 241 of this section.

257

Kting expenses, overbilling, and spurious rebate and discounting
Hcedures.

he subcommittee also noted that in many instances the pay-
Dits represented a loss to American stockholders, since they re-
lied the profits available for distribution. This situation could
•€ilt in suits against the corporations, which are also subject to
nsecution under various U.S. laws.^^^

lore important, the subcommittee found that not all companies
[jerienced demands for payments and that many who did refused
oiccede to them. This did not seem to have affected their business
nCorea.

he subcommittee was particularly concerned about the serious
csequences for Korean democracy resulting from corrupt busi-
W3 practices and political payments. Bribery of government offi-
is is not simply a business transaction. The payments can help
cpients achieve and maintain political power, at times illegally.
ii'Stantial amounts of the payments from American corporations
tpear to have gone into the campaign coffers of the ruling Demo-
T:ic Republican Party. The corrupt relationship between the Gov-
nment and the foreign firms it regulates has enabled the DRP to
D lopolize most of the funds available in Korea for political activi-
ymd vastly to outspend its opponents in election campaigns.^"

he subcommittee found that although some companies may
ue regarded their payments as "contributions to democracy,"
iters made payments specifically to prevent a change in political
eiership.

he subcommittee also addressed the very serious questions that
x:-upt business practices raised about U.S. foreign policy toward
Cea. The enormous increase in U.S. trade and investment in the
Itublic of Korea in the 1960's and 1970's was consistent with a
n or U.S. foreign policy tenet — that the United States had a vital
"C! to play in the development of South Korean economic self-
ii iciency, seen as essential to Korean support of its own defense,
rire is no doubt that both the Korean people and their American

A number of companies disclosing questionable payments to the SEC or subject to SEC or
u ce Department enforcement proceedings were subsequently subject to stockholders' law

•See the historical background above. Joungwon A. Kim, op. cit. pp. 255, 271, reports the
d1 ving figures for the 1963 and 1967 National Assembly elections:

Party

Seats won

Percent of total
expenditures

Percent of
total votes

3 elections to the National Assembly:

Democratic-Republican

Civil rule

110

38.2
15.1
13.8
12.8

9.1
11.0

32.4
19.3

Democratic

Party of the People

13.2
8.6

Liberal Democratic .

7.6

Others

" Total

i7 elections to the National Assembly;
Democratic-Republican

19.0

175

129

100.0

45.8
27.2
27.0

100.0
50.6

New Democratic

32.7

All others

16.7

Total

175

100.0

258

business partners have much to be proud of in the rapid econoir
growth of Korea in the last two decades. Nevertheless, the corru
tion in business relations and the correlation between that corru
tion and political support of the ruling party have contributed
the continuance of an autocratic government that denies its cii
zens fundamental civil and human rights. The promotion of a ju'
system of government has also been an important foreign poll
goal of the United States in Korea, a country which historical!!
has been ruled by autocratic regimes. U.S. support for the esta
lishment of democracy in Korea has been far less successful th{
its support of Korea's economic development.

If American business is to succeed in reforming its practic"
abroad, in Korea as elsewhere, which by U.S. law it is now r
quired to do, it will need help from American diplomats in dealii
with governments whose politicians demand payments or with tljl
governments of countries who choose to ignore the payments the
firms make.

The U.S. Government has an obligation to American business
help work out the political problems encountered by U.S. fim
abroad just as those firms have an obligation to report demands f<
such payments to the U.S. Government. The United States must 1
willing to intervene both formally and informally with goveri
ments demanding payments as well as developing other ways
signaling to foreign governments that the American attitude hj
changed. i.

Recommendations

With respect to countries where corrupt commercial practic*'
are known to involve American business interests, the Departmei
of State should consider taking the following steps:

(a) develop and retain in the commercial section of the En
bassy all available information, including intelligence, concen
ing such practices;

(b) urge U.S. corporations to provide the Embassy with infoi
mation concerning their commercial relationships in the com
try;

(c) inform U.S. businesses about the potential problems «
doing business in the country, including problems arising froi
corrupt or questionable practices.

The President should consider establishing a task force cor
prised of representatives of the Department of State, Departmei
of Commerce, Securities and Exchange Commission, and U.S. co
porations to study ways of improving the commercial training (
foreign service commercial attaches. Such training should incluc
the study of corrupt commercial practices which may affect Amer
can business or foreign policy interests in the attache's country (
assignment.

Consideration should be given to amending the Foreign Corrui
Practices Act of 1977 to prevent the diversion of commission pa:
ments to third parties for illegal or improper purposes.

259
V. Educational, Informational, and Cultural Activities

The subcommittee was authorized to investigate educational and
informational relationships between the Republic of Korea (ROK)
and United States. This authorization resulted from allegations
that the Korean Government and the Korean Central Intelligence
Agency (KCIA) attempted to shape public opinion and improve the
image of the ROK in the United States through various question-
able activities.

The Government of Korea has a wide range of official agencies
which legitimately disseminate information about the ROK and
seek to influence U.S. public opinion. However, in many instances
these agencies went beyond acceptable limits in their efforts to
influence U.S. public opinion. These efforts took many forms
during the years 1970-78. This section discusses those which were
' aimed at improving the image of the ROK through financial dona-
tions to American academic institutions, covert and overt use of
research institutes and academic conferences, and approaches to
individual scholars, sometimes involving harassment and intimida-
tion.

This section also describes attempts to influence reporting of the
news media on Korea. The Government censored its domestic press
and limited access of the Korean populace to foreign news sources.
It also sought to manipulate members of the U.S. news media by
harassing correspondents in Korea and offering expense-paid trips
to Korea. Further, the KCIA attempted to drive anti-ROK Govern-
ment Korean-language newspapers in the United States out of
business.

In an effort to centralize its various influence activities, in 1975
the Government sent Han Byung Ki, President Park's son-in-law,
•to New York as U.N. Ambassador to be in charge of all its efforts
to alter U.S. public opinion.

Individuals and organizations closely associated with Sun Myung
Moon also played an important part in shaping public opinion
toward Korea and Korean-American relations. Because it is com-
plex and in many respects unique, the Moon Organization (as the
subcommittee designated it) is discussed separately at the end of
this section. Although the discussion includes extensive detail on
the significant political and economic activities of the Moon Orga-
nization, it is included here because its principal effect on Korean-
American relations related to activities designed to shape public
opinion.

ROK GOVERNMENT INFORMATION ORGANIZATIONS

The Republic of Korea, like other nations, has a number of
government institutions officially responsible for legitimate over-
seas educational and informational activities. Primary, but not
.exclusive, responsibility for informing the world about the ROK
currently lies with the Ministry of Culture and Information, spe-
cifically with the Korean Overseas Information Service (KOIS).
Domestic affairs are handled by the Bureaus of Public Information,
Arts, Cultural Affairs, and Press and Broadcasting Affairs within
the Ministry.

35-508 O - 7R - U

260

Within Korea, the Ministry operates the state-owned radio and
television network, Korean Broadcasting System (KBS), and dis-
seminates government programing to various private radio and
television broadcasting companies. The KBS has in the past had
certain informal agreements with U.S. Government agencies; it
relayed Korean-language Voice of America broadcasts live for the
United States Information Agency (USIA) until 1973, for example.
In addition, broadcast items prepared for foreign dissemination are
produced at KBS and Ministry of Culture and Information facilities
in Seoul and distributed through the KOIS.

The KOIS runs approximately 44 information centers around the
world, including the Korean Information Office (KIO) in Washing-
ton, D.C., the principal official source in the United States for
informational material on the ROK. While the KIO is attached to
the Korean Embassy, it is actually under the joint direction and
control of the Ministry of Foreign Affairs and the Ministry of
Culture and Information; its director, the Cultural and Information
Attache, is responsible to those Ministries.

The prime responsibility of the KIO is that of official spokesman
for the Government in contacts with U.S. Government agencies,
U.S. mass media, and the American public. It is in charge of
dissemination of press releases, ROK policy statements, and bro-
chures and booklets about the ROK published in Korea by various
Ministries. Further, the KIO publishes the weekly Korea Newslet-
ter, which contains news of Korean society and culture; it also puts
out other informational material in English. Although it focuses
mainly on the Washington, D.C., area because of the concentration
of U.S. national press and Government agencies, the KIO does
distribute material throughout the United States. Another impor-
tant function of the KIO is to study the U.S. media to ascertain
what image the American public and leaders have of Korea. This
information and opinions of U.S. media staff on events concerning
Korea are routinely reported to the Ministry of Culture and Infor-
mation. The KIO also has film-lending and library facilities open to
the public.

The Korea Information Service, a branch of the Ministry of
Culture and Information located in Seoul, puts out two English-
language publications: The English language daily Korea Herald
and the weekly Korea News Review, both widely circulated to U.S.
academic, business, and government institutions, as well as to a
great number of private individuals. Although a U.S. edition of the
Korea Herald is published in this country, news content and edito-
rial policy do not vary from the Seoul edition and represent official
policy.

Each of the eight consulates in the United States also dissemi-
nates material to persons within their jurisdictional boundaries;
some of it is published in the United States, some in Korea. The
material includes brief descriptions of both the Republic of Korea
and the Democratic People's Republic of Korea (DPRK), as well as
details of activities, speeches, and policy statements by ROK Presi-
dent Park Chung Hee or other official spokesmen. Business reports
are also covered. Other publications of an "academic" nature are
published by a number of research institutions and universities in
Korea and distributed by the consulates. Many of these publica-

261

tions are funded covertly by the Government. For the most part,
these materials are distributed free of charge.

The Ministry of Education, particularly through the Internation-
al Education Section, also handles informational and educational
matters. Its responsibilities in the United States are to: (1) Oversee
the sending of Korean students to this country; (2) assist those
students and monitor their activities; (3) provide educational mate-
rials in Korean and English to both American academic institu-
tions and schools for Korean children; and (4) in some cases, over-
see applications for grants to fund Korean studies programs and
research at American universities.

The Education Attache in the Korean Embassy in Washington,
D.C. acts as the Education Minister's voice in the United States. He
is the official contact with the U.S. Government and American
institutions of higher learning. However, during the past decade
the Minister of Education personally played a crucial role in mat-
ters concerning the Ministry in the United States. This was par-
ticularly true of former Education Minister Min Kwan Shik, who
had an active role in ROK Government grants to several U.S.
academic institutions and continued to be involved in negotiations
with American universities over other grants after he left the
Ministry of Education in 1974.

One of the responsibilities of the Education Attache is to oversee
Korean students in this country. This job covers scholarships, infor-
mation on U.S. academic institutions, and guidance on students'
problems. Although the Education Attache has on occasion moni-
tored political activities of students in this country, this is not an
Dfficially defined responsibility.

Korean-language material is also distributed by the KCIA to
Korean residents in the United States. According to Kim Sang
Keun, a KCIA official in the Embassy in charge of Korean resi-
dents in the Washington, D.C. area from 1971 to 1975, particularly
after the establishment of the Yushin constitution in 1972, both the
KCIA and the Ministry of Culture and Information prepared public
relations materials on the Yushin system.^ Kim received KCIA
materials from Seoul and distributed them to Korean residents in
Washington through the KIO and the consular section of the Em-
Dassy. He also gave them directly to Korean residents with whom
le had contact.

The Embassy itself on occasion distributes material published by
Dther organizations. For example, in 1977 it sent out free copies of
Korean Phoenix, a book published by Prentice-Hall; they went to
mdividuals and organizations throughout the country with the
compliments of Ambassador Kim Yong Shik.

Another informational responsibility of ROK consular offices is
X) distribute material designed to promote tourism and facilitate
:ravel to Korea. This is done in conjunction with normal consular
iuties and is a service to Americans wishing to visit Korea.

Similarly, promotional information concerning trade between the
Jnited States and the ROK is distributed through the Government-
•un Korean Trade Promotion Office (KOTRA), with branches m
najor American cities.

See "Part C-II: Intelligence Activities and Plans," p. 92.

262

Over the years, the ROK Government has contracted, in accord-
ance with U.S. law, for the services of a number of individuals and
firms engaged in public relations to improve the image of Korea in
the United States. The objective, in the words of a ROK Embassy
spokesman, has been

to communicate to the American people information about the political, economic,
social, and cultural accomplishments of the government and people of the Republic
of Korea and the strategic importance of the country to the free world. In other
words there is obviously a lot more to Korea than today's news reports would
indicate.'*

The individuals and firms representing the Government are re-
quired by the Foreign Agents Registration Act to register with the
U.S. Department of Justice.

ATTEMPTS TO INFLUENCE THE U.S. ACADEMIC COMMUNITY

The subcommittee's inquiry into possible attempts by the ROK
Government to influence the academic community in the United
States stemmed from allegations of such attempts. Prof. Lee Jai
Hyon, former chief cultural and information attache of the Korean
Embassy in Washington. D.C., testified before the subcommittee on
June 10, 1975 that part of a 1973 Government plan ^ to influence
American public opinion included efforts to "organize indirectly, or
to finance covertly scholastic meetings, seminars, and symposia of
Korean and American professors to rationalize [President] Park's
dictatorship or, at least, to curb their criticism."* Professor Lee
also said that the Korean Government was to organize associations
of scholars in order to "extract their support for Park, with reward
of [ROK] Embassy entertainments and possibly free VIP trips to
Korea."* Such efforts to use American academic institutions and
scholars for political purposes were part of a larger clandestine
KCIA plan to improve the image of the Government in this coun-
try through "seduction, payoff, and intimidation." *

On December 16, 1976, following shortly after U.S. media reports
in October and November of large-scale Government efforts to
peddle influence in the United States, the New York Times report-
ed that ROK efforts in the academic sector paralleled "the drive in
Congress to develop a climate that favors Korean interests."^ The
article cited the allegation that a grant to Harvard University from
Korean sources was intended to curb criticism of the Korean Gov-
ernment by two Harvard University professors. The article quoted
a Korean newspaper operating under strict censorship, which
stated that one objective of the grant to Harvard University was
"to promote counteractive efforts against those who spearhead
anti-Korean Government moves * * *, thereby to engender a pro-

» Korean Information Office, Korean News, Sept. 10, 1970.

'For a discussion of this and other ROK Government and KCIA plans, see "Part C-II:
Intelligence Activities and Plans," pp. 96-97.

♦Human Rights in South Korea and the Philippines: Implications for U.S. Policy, hearings
before the Subcommittee on International Organizations of the Committee on International
Relations, U.S. House of Representatives, 94th Congress, 1st sess., May 20, 22, June 3, 5, 10, 12,
17, and 24, 1975, p. 180.

»Ibid.

•Ibid., pp. 179-181.

'The New York Times, Dec. 16, 1976.

263

Korean atmosphere at Harvard and in other American academic
circles." *

Other articles in the U.S. media, notably Christianity in Crisis «
and the Bulletin of Concerned Asian Scholars, *<> also alleged that
grants to the American academic community had been used by the
Korean Government and KCIA to influence U.S. scholarship on
Korea and East Asia. The Bulletin article asserted in part that the
KCIA provided "cash through various front organizations to cer-
tain Korean scholars in the United States, mostly Korean special-
ists. These scholars in turn organize * * * gatherings * * * in
conjunction with larger academic events of American origin,""

The subcommittee's attention was also drawn to KCIA plans to
''utilize" and "manipulate" specific individuals and institutions in
the U.S. academic communitv, as outlined in the "1976 KCIA Plan
for Operations in the U.S.' " According to this plan, academic
conferences and research institutions were to be used in part to
"create a pro-ROK atmosphere," and "pro-ROK" scholars were to
be used to counter academic meetings by "anti-ROK" scholars in
this country. Further, scholars thought to be critical of the Korean
Government were to be invited to Korea and "co-opted." For these
and other operations aimed at the American academic community,
the KCIA was to provide specific dollar amounts totaling approxi-
mately $188,000.

By examining Korean-American relations in the academic field,
the subcommittee sought to determine: (1) What offers of financial
assistance, whether covert or overt, had been made to U.S. acade-
mia by Korean sources; (2) whether the Korean Government had
attempted to use the U.S. academic community to further its politi-
cal interests; (3) and if so, whether the Korean Government had
been successful. The subcommittee examined the cases of eight
U.S. universities, several research institutions, and numerous indi-
vidual scholars who had received offers of financial assistance or
trips from Korean sources. Nevertheless, it should be noted that
there may be cases of which the subcommittee was unaware. Fur-
ther, with respect to individual scholars, the subcommittee did not
have the resources to look into every case of offers of support from
1 Korean sources. In addition, the subcommittee investigated all the
academic institutions and scholars targeted in the 1976 KCIA plan
ito determine to what extent the plan was actually implemented.

Grants to U.S. academic institutions

Korean studies programs at American universities have been
financed in the past through National Defense Education Act

• For a translated copy of the Korean newspaper article, see "Activities of the Korean Central
Intelligence Agency in the United States," hearings before the Subcommittee on International
Organizations of the <:k)mmittee on International Relations, 94th Cong., 2d sess., Part I, Mar. 17
and 25, 1976 (thereinafter referred to as "SIO-I"), pp. 108-109.

•Frank Baldwin, "The Korean Lobby," Christianity in Crisis, vol. 36, No. 12 (July 19, 1976),
pp. 162-168.

'"Kang, Sugwon, "President Park and His Learned Friends: Some Observations on Contempo-
rary Korean Statecraft," Bulletin of Concerned Asian Scholars (October/December 1975), pp.
28-32.

" Ibid., p. 29.

'* "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 1st sess., Part
3, Nov. 29 and 30, 1977 (hereinafter referred to as "KI-3"), pp. 131-133; See also appendix C-85.
For an explanation of the terminology used in this plan, see "Part C-II: Intelligence Activities
and Plans," p. 107.

264

funds, National Defense Foreign Language Fellowships, private
nonprofit organization grants, and general university funds. How-
ever, traditional sources of funding have been drying up, and uni-
versities have been under great pressure to seek outside private
funding. Courses in these programs do not as a rule pay for them-
selves through enrollment and thus must be financed through
other sources. Some institutions offering courses on Korea, such as
Western Michigan University, have never received National De-
fense Education Act support and have thus been totally dependent
on university or outside financing.

Grants are one common type of outside funding. American aca-
demic institutions and individual scholars receive them from a
wide variety of sources, both U.S. and foreign: private individuals,
nonprofit organizations, corporations, and governmental agencies.
Just as varied as the sources of such grants are the purposes for
which they are designated. Most donors place certain stipulations
on the use of funds, usually specifying at least a broad field of
study. These stipulations reflect the particular interests of the
donor.

In the case of most private donors, the stipulations simply reflect
an interest in a particular field of study or a decision that an area
of academic pursuit would suffer without outside funding. Where
the donor is a government or a semiprivate organization associated
with a government, however, the grant inherently has potential
political implications, even if the government does not restrict its
use. Grants made directly by foreign governments, or at their
behest, have an unavoidable "public relations" aspect. Through
such donations, the foreign government receives recognition at
home and abroad as a benefactor of academic pursuits. For many
Third World nations, such recognition promotes their international
prestige and domestic legitimacy. It is of particular value to the
competing governments of divided nations such as Korea. In addi-
tion, the acceptance or rejection of funds from a foreign govern-
ment inevitably involves a statement, explicit or implicit, about the
political system within the donor nation.

Within the U.S. academic community, "academic freedom" to
examine objectively any topic, free of political constraints or re-
strictions, is held to be of utmost importance. A grant offered by a
foreign government raises a key issue: is it possible for a university
to use those funds to study objectively any topic relating to the
foreign country, including those which might be politically sensi-
tive? When the donation is made at the direction of a government
widely considered to be politically repressive and which deprives its
own citizens of academic freedom, a university is faced with an
even more difficult moral decision: Assuming that it can use the
grant so as to not threaten its integrity, should it accept the grant
and thereby risk implying approval of the policies of that govern-
ment?

Officials at each of the universities examined by the subcommit-
tee were aware of the potential political implications and stressed
that each offer from a government or related organization was
weighed individually and carefully. None of the universities had a
blanket policy of rejecting all offers from governments because of
potential conflicts of interest, but all took the position that if the

265

grant or the conditions placed on its use threatened academic
integrity, it would be rejected. One Harvard University official
informed the subcommittee that a grant from the military govern-
ment of Greece had in fact been declined, in part due to the
conditions placed on its use." Further, officials and faculty mem-
bers at each institution stressed that ultimate control over the
actual disbursement of funds had and has to be entirely in the
hands of the university, particularly in the case of a government
donor.

With respect to offers of grants from Korean sources, university
officials at each of the institutions examined by the subcommittee
differed as to whether they would accept them. One university
president told the subcommittee that he would oppose a grant
directly from the government of either the ROK or the Philippines
because of their repressive political policies, but not a grant coming
from private sources within those countries.^* A high administra-
tion official at another university claimed he would be willing to
accept funds from either the DPRK or the ROK, providing there
were no strings attached." Some officials at the University of
Washington felt that acceptance of grants from Korean sources
implied approval of the ROK Government's political policies and
thus conflicted with the interests of the university.
I Between 1972 and 1978, Korean sources made over $2.4 million
iavailable to American academic institutions. These donations took
three forms: (1) grants from the ROK Ministry of Education for
specific projects or programs; (2) an endowment from the Korean
Traders Scholarship Foundation; and (3) annual grants from the
same foundation, one of which was declined. There was also an
Dffer of a grant from an operative of the KCIA. Eight specific cases
are described below.

University of Hawaii

The University of Hawaii first approached the ROK Government
in 1969 about funds for a proposed Center for Korean Studies.
Initial inquiries were made by David Steinberg, an employee of the
^ia Foundation. Although Steinberg was not affiliated with the
university, in 1969 he volunteered to assist university President
Harlan Cleveland in fundraising for the center and wrote to a
personal friend. Prime Minister Chung II Kwon, endorsing the
fundraising effort.^* In a subsequent meeting between Steinberg
ind Chung, the subject of funding a traditional, Korean-style build-
ing to house the center was raised. Other possible t5^es of govern-
ment contributions to the center were also raised.

Only the building project was approved. This was done by Minis-
ter of Education Min Kwan Shik when President Cleveland was
visiting the ROK in February 1972 for further negotiations over
the type and size of the donation. The negotiations continued into
the next year. Discussions were held within the university commu-
nity over the location of the building.

" Staff interview with President Derek Bok, May 4, 1978.
" Staff interview with President Derek Bok, May 4, 1978.

" Dr. Wm. Theodore deBary of Columbia University in a discussion with members of the
iniversity's East Asian studies community, Apr. 27, 1977.
'• Telephone interview with David Steinberg, Aug. 14, 1978.

266

The initial agreement between the university and the Govern- ii
ment was for a $436,666 building, with half the funds to come from
Government sources and half from the Korean community in the
United States. Groundbreaking was to coincide with the ceremony
of the 70th anniversary of Korean emigration to Hawaii being
planned by the Korean consulate in Honolulu for January 13, 1973.
At the request of the Korean Government, Prime Minister Kim
Jong Pil was invited to attend.*^

At about the time of the ceremony, some faculty members ques-
tioned the propriety of receiving funds from one government of a
partitioned country. ^^ The university decided to approach the Gov-
ernment of the DPRK as well. Kang Kyung Koo, former education
attache at the ROK Embassy in Washington, D.C., testified that as
a result of his Government's concern about trips to and solicitation
of funds from the DPRK by Prof. Suh Dae Sook, director of the
center, the Embassy held discussions over whether or not to termi- ,»
nate the university's grant, i* This did not happen, and the subcom-"
mittee was not aware of any other attempt to influence the Univer-
sity of Hawaii through the grant to that institution. The subcom-
mittee was also not aware that any funds were actually raised in
the DPRK.

By September 1973, the estimate for construction of the center
had risen to $876,000.^0 The Korean Government increased its
pledge to $420,000 to help cover the increase, with the remainder to
be raised in the Korean community in the United States. Actual
construction was initiated in June 1974, but the project was contin-
ually plagued by rising costs through December 1975. In that year,
the Government made its final payment, having contributed a total
amount of $574,667.60.2* The subcommittee was not aware of any
other funds donated by the ROK to the Korean studies program ati
the University of Hawaii.

Western Michigan University

Western Michigan University is part of the Michigan State Uni-
versity system. Until 1972, its Korean studies program, part of the
Institute of International and Area Studies, consisted of periodic
courses on Korean history and society and a biannual conference
on Korea, initiated in 1967. This program had been financed entire-
ly through university funding by the State of Michigan.

In late 1971 and early 1972, several professors conceived the idea
of establishing a Center for Korean Studies under which an ex-|
panded Korean studies program was to be established. The initial
concept for funding the center was to solicit financial support from
the Korean community in the United States. According to universi- 1
ty officials, over $5,000 was subsequently raised from this source.

" University of Hawaii memorandum, dated Sept. 18, 1972, of a meeting between university
and consular officials on Sept. 14, 1972.

'• Letter dated Jan. 29, 1973, to university President Harlan Cleveland from Prof. Allen R.
Trubitt. j

'•"Investigation of Korean-American Relations," hearings before the Subcommittee on Inter- |j
national Organizations of the Committee on International Relations, 95th Cong., 2d sess.. Part 5, '»■
June 1, 6, and 7, 1978 (hereinafter referred to as "KI-5"), p. 100-101.

*> Draft of fundraising letter dated September 1973 and circulated over the name of Chung 'u
Dho Ahn, chairman of the fundraising committee. '

" Letter dated Dec. 22, 1975, from the Consul General in Honolulu, Yoon Hee Lee, to the new \
university president, Fujio Matsuda.

267

On May 10, 1972, Andrew C. Nahm, a professor of Korean and
East Asian history at the university, sent a letter to the ROK
Minister of Education requesting $18,055 for academic year 1972-73
:o support the center, which had been officially established in the
spring of 1972. This request was opposed at the time by other
'acuity members. =^2

There was no record of a response to this request until August
L973. In November 1972, however, Korean Ambassador Kim Dong
Fo donated $700 to the center to help finance the conference, to be
leld at the university on November 10-11. Kang Kyung Koo,
brmer education attache, testified that he personnally delivered the
;heck to Professor Nahm.^^

The subcommittee received conflicting opinions from conference
)articipants as to whether this support was acknowledged at the
ime of the conference. However, acknowledgement was made in
he proceedings, ''Korea and the New Order in East Asia," pub-
ished in 1975.

In testimony before the subcommittee. Prof. Lee Jai Hyon testi-
,ied that upon returning to the Embassy, Kang boasted to the
\mbassador that as a result of the grant. Professor Nahm "wrote a
etter to the New York Times in support of [President] Park's
K)lice state measures."^* Kang testified that he had suggested that
^ahm write a letter to the Times in response to an earlier letter
riticizing the Yushin Constitution. Kang said that Professor Nahm
vas himself thinking of writing such a letter and ev.entually did so
ibout a week after the conference.** In the letter, dated November
:0, 1972, Professor Nahm, though expressing a desire that martial
aw be lifted in Korea, cited numerous justifications for the
stablishment of * 'unconstitutional" measures in Korea by Presi-
ient Park.*® Nahm denied talking with Kang about the letter.*^

The response to Professor Nahm s request of May 1972 for finan-
ial support came from ROK Ambassador Kim Dong Jo: One letter,
iated August 1, 1973, went to Professor Nahm, and another, dated
iugust 2, 1973, to the president of the university. The letters
tated that the Ministry of Education had allocated $17,500 for a
rant to the Center for Korean Studies. The center received partial
•ayment in August and the remainder in September, after submit-
ing reports on its activities, both completed and proposed, during
cademic year 1973-74. These and subsequent Government dona-
ions were used to offset staff costs, sponsor guest lectures, publish
•roceedings of the biannual Conference on Korea, and establish a
ummer school program on Korean culture at the center. An anal-
sis of the center's financial records showed that a sizable portion
about 30 percent) of the funds was spent on foreign travel by
Vofessor Nahm and others, a fact not included in the reports to
he Korean Government.

Ambassador Kim Dong Jo made another grant of $1,000 in the
all of 1974, again to help finance the conference to be held in
'November of that year.

" Interview with Prof. Chang Do Young on May 2, 1978.

»KI-5, pp. 109-111.

"Op. cit., Human Rights in South Korea ' * ', p. 180.

»KI-5, p. ill. . _,. ^ ^^^

*• For a copy of Professor Nahm's letter to the New York Times, see appendix C-171.

" Interview with Prof. Andrew C. Nahm on May 2, 1978.

268

Professor Nahm made other applications for financial assistance
to the Ministry of Education and received the following grants:

Academic year: Amount Source

1972-73 $700 Ambassador Kim Dong Jo.

1973_74 !"I!I. 17,500 Ministry of Education.

1974-75 ".!!"""!!! 1,000 Ambassador Kim Dong Jo.

1975_76 22,000 Ministry of Education.

1976-77 '. 15,000 Ministry of Education.

1977-78 15,000 Ministry of Education.

University officials told the subcommittee that no conditions
were placed on the use of the funds. Professor Nahm and others at
the university stated, however, that Korean domestic political mat-
ters were generally avoided when considering topics for the bian-
nual conferences.*® Publications of the center did not contain any
material critical of the Government. Several persons at the univer-
sity told the subcommittee that participation in the biannual con-
ferences changed over the years, including fewer individuals who
had been critical of the Government. However, this change ap-
peared to have been the result of potential participants wanting to
avoid conferences using ROK funds.*® The subcommittee saw no
evidence that anti-Government scholars were deliberately excluded.

Documents from the university indicated that Professor Nahm
was cognizant of the public relations value to Korea of grants to
U.S. academic institutions. In a letter dated October 10, 1973 to
Ambassador Kim Dong Jo, Professor Nahm wrote, ''The Center has
made a good start this year and we are looking forward next year
to promoting not only Korean Studies per se but increasing the
general knowledge of Korea among the American people and revis-
ing their image of Korea." ^^

The Korean Government also saw the public relations aspect of
these grants. In 1977 Ambassador Kim Yong Shik, fearing adverse
publicity in the United States over the grants, held one up that
had been sent from Seoul for the center. In a letter to the presi-
dent of the university dated August 31, 1977, Professor Nahm
wrote —

In my conversations with the Korean officials it became apparent that the new
Korean ambassador (Yong-shik Kim) to the U.S. is afraid of transmitting the money
to us while the Korean lobbying scandal investigation is in progress. In other words,
he does not want any more problems than he has. It became clear that he did not
want to do anything to invite any new investigations on the part of the Congress or
the Justice Department of the U.S. I made various efforts to see [that] some
"instructions" from the home office or higher authorities in Korea to the ambassa-
dor be sent in behalf of us, but they seemed hesitant to pressure him since "he has
the ffcial decision-making power" in dealing with money matters in foreign coun-
tries."

In the same letter. Professor Nahm noted that Augustine Choe ^
(Choe Suh Myun), director of the Tokyo Institute for Korean Stud-
ies, was going to bring the matter up with President Park Chung

'• Interviews with Prof. Andrew C. Nahm and Prof. C. I. Eugene Kim on May 2, and May 1,
1978, respectively.

» Interviews with Prof. C. I. Eugene Kim on May 1, 1978 and Prof Chang Do Young on May
2,1978.

"> Professor Nahm's letter to Ambassador Kim is printed in appendix C-172.

" Professor Nahm's letter to President John T. Bernhard is printed in appendix C-174.

269

lee the following month.^^ The center received the grant in
)ctober.

Choe interceded on behalf of the Center for Korean Studies in
elation to funding on at least one other occasion. In February
975, he financed a 7-day visit to Korea and Japan by the president
f Western Michigan University. During this visit, he arranged for
he president to receive an honorary degree at a Korean university
nd also arranged and participated in meetings between the presi-
ent and high-ranking Korean Government officials. According to

report on this visit written by the president, at one such meeting
:hoe ''argued" with the ROK Vice-Minister of Education for sub-
tantial financial support for the center.^^

In March 1978, Western Michigan University established an ex-
hange program with Chungnam University in Taejon, Korea, the
esult of 3 years of negotiations between the two institutions.
Jnder this program, faculty members from each institution will
pend 6 months to 1 year in residence at the other university doing
Bsearch. Funds will come from the regular university budget and
•om Chungnam University. According to the exchange agreement,
le total annual cost to Western Michigan University will be ap-
roximately $5,500.=»*

Harvard University

A grant of $1 million, made by the Koresm Traders Scholarship
oundation (KTSF) in June 1975 for an endowed chair at Harvard
University in "Modern Korean Economy and Society," was the
irgest single grant ever given an American university by a
Korean source. It was also the first grant from a Korean source not
) come from the Ministry of Education. The foundation, controlled
nd financed by the Korean Traders Association (KTA) and its
lember corporations, provided the funds after being directed to do
), in the opinion of the subcommittee, by the highest levels of the
orean Government.

Harvard University holds a special significance in the minds of
le educated Korean public and government leadership because
ley view it as the most prestigious university in the United
bates. Moreover, many Government leaders attended Harvard or
articipated in its programs, among them Hahm Pyong Choon,
»rmer Ambassador to the United States; Kim Jong Pil, former
irector of the KCIA and Prime Minister; and Chung II Kwon,
irmer Ambassador to the United States, Prime Minister, and, as
' 1978, Speaker of the National Assembly.

In Korea, Harvard's name is also identified with Professors
dwin O. Reischauer and Jerome Cohen, two outspoken critics of
le Yushin political system and other authoritarian policies of
resident Park Chung Hee. Following the kidnaping of Kim Dae
mg from Tokyo in August 1973," they and other professors at
arvard actively sought, through the Department of State, to have
im released in order that he be allowed to take a fellowship
reviously offered by Harvard.'* Further, in August 1974, citing

"Appendix C-174.

" This report is printed (in part) in appendix C-173. », o iq'7q

"Interviews with President JohnT. Bemhard and Prof. Andrew Nahm on May ^, iy/».

"See "Part B: Review of Korean-American Relations," p. 42

••KI-5. p. 49.

270

Korean Government repression of civil liberties and press freedom,
Harvard's Nieman Foundation for Journalism indefinitely suspend-
ed Korea's 12-year participation in the foundation's program for
training foreign journalists.^'

Harvard fundraisers had to deal with the Korean Government's
suspicion of Harvard that resulted from the criticism by prominent
Harvard faculty members. Harvard officials were aware of this
early in the fund drive that began in the early 1970's. T. J. Coo-
lidge, Jr., later to head the fundraising efforts of the Harvard
Council on East Asian Studies, and Professor Cohen expressed such
awareness in letters to Marshall Pihl, a Harvard lecturer, who had
been responsible for drawing up the initial fundraising proposals
for Korean studies at Harvard. Pihl had arranged an informal
dinner in March 1974 for Hahm Pyong Choon, the newly appointed
Korean Ambassador to the United States and an alumnus of the
Harvard Law School. Pihl saw the occasion as a "remarkable op-
portunity to discuss the future of Korean studies at Harvard * * *
with a man in good communication with the top." ^® Subsequent to
that dinner, Coolidge and Cohen wrote Pihl in response to his
request for their assessment of the Ambassador's comments about
the prospects of raising funds in Korea for Korean studies at
Harvard.

In his letter, dated April 3, 1974, Coolidge said:

The Korean Government will certainly be somewhat of a problem because the^
are quite sensitive about some of Harvard's publicized stands on such matters as
Kim Dae Jung * * * I think they are liable to push pretty hard to inject one oi
their own people or some of their ideas. Without making an issue of any of the
issues, so to speak, I think we should work up something specific that Ambassadoi
Hahm can bring back as a trophy or inducement.

Cohen commented on April 29, 1974:

My perception of Ambassador Hahm's interest in helping us raise funds is a gc
deal less sanguine than yours. He has been explicitly negative on two occasions in]
private talks, and the subsequent activity of EOR ^* and myself makes any official's
enthusiasm even less likely. Surely, the last thing the Korean Government seems tcj
want is any independent, informed scholar on Korean politics and law at Harvard
This attitude will affect our chances with the business community as well asj
government. In any event, we should make no special concessions to potential]
Korean donors but should treat them as we do others — i.e., make it clear that nc:
strings can be attached.

Although Harvard had begun a general campaign to raise fundgj
for East Asian studies in 1972, in June 1974 the Council on EastJ
Asian Studies, headed by Prof. John K. Fairbank, was established,
Direct contacts with Koreans were made exclusively by Coolidge, ir
charge of the council's fundraising efforts. Working out the terms
and conditions of the grant was to be the responsibility of the^
senior faculty, with Coolidge serving as intermediary.

Coolidge made his first contacts in Korea and three other Asian
countries while on a business trip in September 1974. On thiS;
Asian trip, he first went to Korea for a few days where he dis-
cussed Harvard's fundraising campaign with business associates ir
Seoul. After a 2-week trip to several other Asian nations, Coolidge-
returned to Seoul and met with a Blue House official to brief hiDcj

" A copy of the letter suspending Korea's participation in the Nieman Foundation is printecj
in appendix C-175.
»• Letter dated Feb. 6, 1974 from Marshall Pihl to T. J. Coolidge, Jr.
'• Edwin O. Reischauer.

271

m Harvard's fundraising plans. Coolidge could not recall whether
luring this Blue House meeting, there was any mention of the
Corean Traders Association's role in fundraising efforts for Har-
ard.**'

Several days later, on October 7, Coolidge met again with Blue
louse officials and received a commitment from Kim Chong Yom
:hief of the Blue House Secretariat," that the ROK Government
lad decided to approve a grant to Harvard of approximately $1
nillion. In a memorandum of this meeting, dated October 8, 1974,
bolidge noted that Kim told him "the money would come from
irivate Korean companies via the Korean Traders Association."
lim stated that "the money would have to be restricted to a
rofessorship concerning the Korean economy" because the money
^ould be contributed by Korean businessmen. Coolidge told Kim
hat he "was particulary glad the KTA was selected" as the
ledium for funds to be given to Harvard because its president,
'ark Choong Hoon, was a personal friend.**

Because Government permission was required for sending large
mounts of currency out of Korea, some Harvard University offi-
ials surmised that this Blue House meeting was held to seek
pproval for the currency transaction involved in the grant to
tarvard. However, when questioned by subcommittee staff, Coo-
dge could not remember whether there had been any discussion
t the meeting about foreign exchange matters. ^^

Coolidge could not recall whether he had been told prior to the
►ctober 7 meeting that the KTA wished to contribute $1 million to
[arvard. The memorandum of this meeting is the earliest mention
1 Harvard documents of any KTA role in the grant. Further,
lere were no KTA representatives present at either of the Blue
[ouse meetings. Coolidge told subcommittee staff that he was un-
ware how the KTA was designated to be the donor because con-
ict with Korean business leaders was handled by his business
ssociate, Kim Woo Choong, president of Dae Woo Industries Co.
oolidge did not discuss the proposed grant with KTA officials
rior to departing from Seoul on October 9, 1974.** Based upon this
iformation relating to Coolidge's two meetings with Blue House
Pficials, the memorandum of October 8, and other KTA funding
atterns observed by the subcommittee in which the KTA acted at
le direction of the ROK Government, the subcommittee concluded
lat the ROK Government directed the KTA to contribute $1 mil-
on to Harvard University.*^

"Interview with T. J. Coolidge on Sept. 28, 1978.

*'The Chief of the Blue House Secretariat is one of the most powerful individuals in the
orean Government. This position was held by Lee Hu Rak from 1963-69 and by Kim Chong
)m since 1969.

" T. J. Coolidge's memorandum of this meeting is printed in appendix C-176.
" Interview with T. J. Coolidge on Sept. 28, 1978.
*^Ibid.

** The subcommittee believed that the documents provided by Harvard University, while not
finitive, supported this conclusion. Harvard University felt that the documents did not contra-
\2t its interpretation of how the KTA came to donate the $1 million. (See appendix, C-181 for a
:ter outlining Harvard University's conclusions.)

When the Harvard documents and interviews with Harvard officials were considered m light
other findings of the subcommittee unknown to Harvard; nsunely: (1) that the ROK Govern-
2nt as early as 1971 had used Korean businessmen and corporations to covertly finance a
search institute in the United States (see p. 290), (2) that the KCIA had transferred responsi-
iity for funding this research institute to the KTA in late 1975 (see pp. 290-291) and, (3) that
e ROK Government in mid-1977 had directed the KTA to contribute funds to Columbia
liversity (see p. 277), the subcommittee's conclusion regarding the Harvard grant was
"engthened.

272

The following week, on October 15, the Harvard Council decidec
that "although the Governments of Taiwan and South Korea mighl
be inclined to give substantial gifts to Harvard in order to generate
favorable publicity within the United States, the council must care
fully avoid any action in that direction." One of the council'^
concerns was that "faculty and student reaction to gifts from the
Governments of South Korea and Taiwan could be severe, includ
ing perhaps a faculty vote to reject the gifts." *« Harvard officiaL
told the subcommittee that the council was also concerned aboui
accepting money from Taiwan at a time when contacts were bein^
made with the People's Republic of China.

At a council meeting 2 days later, Coolidge reported on his trij
to Korea and the grant from the KTA. Based on this report, it wai
decided that a proposal would be drafted and submitted to th(
KTA.

On October 29, the council adopted the general principle thai
"no gifts will be sought from the governments of divided countries'
and that if "such gifts are offered from these sources, the immedi
ate response will be to work toward private gifts to Harvard in
stead." ^'

As noted above, the Korean Government wanted to restrict th(
use of the grant to the study of the Korean economy. Coolidge ha(
told Kim Chong Yom that he would have to discuss the restrictioi
with Harvard officials. Harvard refused to limit the use of th«
grant to the study of the Korean economy, however, and wanted t(
broaden its use to include the study of modern Korean econom:
and society. Harvard officials felt it would be difficult to fim
qualified candidates for a position in Korean economics and that r
broader field of study would better fit with other programs in Eas
Asian studies than would a focus on economics alone.

Over the next 6 months there were discussions and correspon
dence between the KTA and Harvard to determine the exact pur
pose for which the Korean money could be used. Ultimately, th<
KTA accepted Harvard's position, and it was decided that the chai
would be in Modern Korean Economy and Society.

In addition to wanting to limit the use of the grant to a study o
the Korean economy, the ROK Government also was concerned
about possible use of the money by professors critical of the Pari
Chung Hee regime. This concern was conveyed to Harvard offici
on several occasions during the course of discussions over th
grant.

Minister Yang Yoonsae from the ROK Embassy in Washington
D.C. expressed these concerns directly to Prof. John Fairbanl
during Yang's trip to Harvard in February 1975. Fairbank in
formed the subcommittee that he told Yang that Harvard profes
sors do not use the classroom as a forum to express their politica
opinions and that Harvard appoints professors on the basis o
scholarship, not politics.*®

Professor Fairbank addressed the subject of criticism of the ROI
Government by American professors in a subsequent letter to Yanj

irli
all

*• Minutes of a Harvard Council meeting of Oct. 15, 1974.
" A partial copy of the minutes of a council meeting on Oct. 29, 1974, appears in append!
C-177.
«• Telephone conversation with Prof. John Fairbank on Sept. 26, 1978.

273

ated February 26, 1975. He expressed his opinion that the issue of
ich criticism would "become less important as scholarship devel-
Ds, along with greater public understanding of cultural differences
id practical problems in our respective countries." " In testimony
3fore the subcommittee, Kang Kyung Koo, the ROK Embassy
ducation Attache who accompanied Yang to Harvard, stated that
ang's concern over criticism by Professors Reischauer and Cohen
as shared by various embassy officials.*®

This concern was also expressed in a March 12, 1975 article
30ut the grant in the Joong-Ang Ilbo, a Korean daily newspaper.
he article stated that one objective of the grant to Harvard was
}0 promote counter-active efforts against those who spearhead
iti-Korean Government moves like Reischauer and Cohen, there-
/ to engender a pro-Korean atmosphere at Harvard and in other
merican academic circles." **

The KTA also expressed the fear that the holder of the proposed
lair might make statements critical of the Korean Government.
J. Coolidge conveyed these concerns in a letter to Professor
airbank dated April 11, 1975. He said that P. J. Koh, secretary
jneral of the Korean Traders Scholarship Foundation, the donor
' record, wanted to know what could be done about "the eventual-
y that a faculty member supported by Korean funds might make
iwarranted critical remarks of the Korean Government." ^^ Pro-
ssor Fairbank replied to Coolidge on April 22, 1975, that Harvard
'ofessors are appointed to the Harvard faculty on the basis of
leir scholarship and are entitled to have their own political views.
,e reassured Koh, however, that it was "most irregular" for a
:*ofessor to use his position for political purposes.*^
The grant to Harvard was the Korean Traders Scholarship Foun-
ition's first foreign grant. Prior to 1975, it had donated funds only
t academic institutions within Korea.**

The first portion of the grant was delivered by P. J. Koh in June
175 at a ceremony at Har/ard. At the ceremony. Harvard was

» Professor Fairbank's letter to Minister Yang Yoonsae is printed in appendix, C-178.
^ KI-5, p. 105.
> SIO-1, p. 108.

,» T. J. Coolidge's letter to Professor Fairbank is printed in appendix C-179.
' Professor Fairbank's letter to T. J. Collidge, Jr. is printed in appendix C-180.
'■« KI-5, p. 104. The KTSF actually provided only $520,000 of its own funds. Twelve Korean
•porations were asked to contribute $40,000 each to make up the remainder. The 12 corpora-
ms, many of which figured in other areas of the subcommittee's investigation, are listed below
th corresponding page numbers where they appear in this report or in hearings conducted by
s subcommittee.

Corporation Representative Pages

Dae Woo industries Co Kim Woo Choong 84

Han Tl Synthetic Fiber Kim Han Soo •••••■• •••■■

Union Steel Co Kwon Chul Hyun KI-1, p. 11

Dong Kook Steel Co Chang Sang Tai ••■■••

Sam Sune Mulsan Lee Byung Chul 23j

Han Jin top Cho Choong Hoon ocVooV

Korea Explosives Kim Chong Hee 251, m

Daihan Nongsan Park Yong Hak 236, 249

Hyundai Construction Chung Ju Yung ,;,ic"Vi"7" "

Sunkyong Fit)er Choi Moo Hyun 23b; M-/

Won Poong Industrial Co Lee Sang Soon

Chun Bang Textile Co *Kim Young Joo

274

concerned that it be fully understood that the grant came fro
private Korean sources. According to the minutes of a counc
meeting on June 6, 1975, Harvard was concerned with "intention
or unintentional alteration of Harvard's stated position in recei
ing this gift." For the same reason, Harvard insisted that KTA
public relations firm, Hill and Knowlton, Inc., not make any publ
statements about the grant without clearing them with the unive
sity.

There had been statements in the U.S. press that then-Ambass
dor to Chile, Han Byung Ki, played a role in the negotiations." Tl
subcommittee was told by a former high-ranking official in tl
ROK Consulate in New York that Han made several trips to tl
Boston area about the grant. However, the subcommittee w
unable to obtain further information on this allegation. Han hiij
self denied any role in a letter to the editor of the New York Timj
published on December 30, 1976.

In seeking a professor to hold the chair financed by the KTS'j
Harvard has interpreted "modern Korean economy and society"
include the fields of economics, sociology, anthropology, historj
government, and East Asian languages and cultures. As of Octob,
1978, the chair had not been filled. Thus far, the grant has be«|
used to finance instruction in Korean anthropology, student felloe
ships, and a lecture series. The subcommittee saw no evidence th
political considerations were used to include or exclude individual
from benefiting from the grant.

Columbia University

Columbia's attempts to raise funds in Korea were part of ,
larger fundraising effort for East Asian studies at the university
In September 1975, the Ford Foundation had offered Columbiai
grant of $600,000, which required that Columbia raise $l,800,0i
from other sources.*^*

Columbia's first effort to raise funds in Korea was in response
an offer of help from Min Kwan Shik, former Minister of Educ
tion. Min had stayed briefly at Columbia in the fall of 1975. On 1:
departure, he suggested to Prof. Gari Ledyard of the Department
East Asian Languages and Culture that if Columbia needed fun
to support Korean studies, he would do what he could to hel
Professor Ledyard said there was a need for funds and that i
would contact Min after consulting with the university.

After consultation with the Korean Studies Committee, Ledya,
wrote a long letter to Min thanking him for his interest, outlinii
a comprehensive program for strengthening Korean studies at C|
lumbia, and estimating that the proposed program would cc^
about $3.3 million. About a month later Min answered, saying t,
cost estimate was very high, but he would try to help. This was t.^
last heard from Min on the subject.*'

In the fall of 1976, Dr. Wm. Theodore deBary, executive vi
president for academic affairs and provost and professor of orient
studies, was asked to participate in the drive because of his provi!
fundraising abilities and his knowledge of and contacts in Ea

» See a Dec. 16, 1976, article in the New York Times entitled "Koreans Linked to Bid to T*
U.S. Education."

" Staff interview with Dr. Wm. Theodore deBary on May 11, 1978.
" Staff interview with Dr. Gari Ledyard on May 11, 1978.

275

^ia. From this time, fundraising in Korea was primarily Dr. de-
ary's responsibility.

In November 1976, in the midst of widespread publicity about the
:orean scandal. Prof. Kim Wan Hee of the Columbia University
lectrical engineering department took to Seoul virtually the same
roposal that had earlier been sent to Min. Professor Kim informed
'r. deBary that he had presented Columbia's ideas directly to
resident Park Chung Hee. He reported that the ROK Government
as watching developments in the United States closely because of
le bad publicity and uncertainty over the coming Carter adminis-
•ation. He also said he would contact high Government officials
id expected that meaningful discussions of Columbia's goals could
3gin by early spring 1977.

In February 1977, the president of Seoul National University
;NU) invited Dr. deBary to Korea to deliver a lecture on Confu-
anism and participate in discussions with university professors in
ite March or early April. Dr. deBary saw this as an opportunity to
>new and broaden contacts with Korean scholars in his discipline
5 well as an opportunity to make contacts useful for Columbia's
indraising drive. Before going, Dr. deBary discussed the advisabil-
y of raising funds in Korea with his colleagues, who agreed with
16 idea in general.

Dr. deBary declined the offer of Seoul National University to pay
r his trip. He did not attempt to keep the trip secret, nor did he
!ek publicity. Columbia sent Professor Kim to Seoul in advance to
3lp arrange deBary's schedule.

While in Korea, Dr. deBary discussed with SNU officials the
)ssibility of establishing an academic exchange program with Co-
mbia. He also called on Park Choong Hoon, chairman of the
orean Traders Association, and Hwang San-Duk, Minister of Edu-
ition, to discuss Columbia's fundraising drive. They made no con-
ete responses. He also accepted an invitation from President
ark Chung Hee to discuss neo-Confucianism. At the Blue House,
jBary mentioned the fundraising drive to the President, but they
d not discuss the matter. A picture of President Park talking
ith Dr. deBary was widely featured in the Korean press.
' Upon his return to Columbia, Dr. deBary discussed the results of
•IS trip with the others involved in the fundraising campaign, and
ley developed a more modest proposal for $1.5 million.^®
A certain amount of controversy arose within the Columbia East
sia studies community as a result of deBary's trip. Four Korean
udents at Columbia, apparently fearing reprisals at home if their
entities became known, wrote an anonymous letter to the Colum-
a Spectator on April 14, 1977, criticizing the trip and especially
le meeting with President Park. On April 25, 24 members of the
sian studies community, including two faculty members, signed a
tter- to the Spectator supporting the four Korean students and
jserting that any grant from the ROK Government would neces-
irily have a political aspect. They did not say that Columbia
lould not take government money, but rather urged two things.
irst, the university should be certain to retain control over pro-
,*am priorities — especially any exchange program — in order to be

'* Above description of Dr. deBary's activities is based on a staff interview with him on

iy 11, 1978.

35-508 O - 78

276

sure that a grant would not be exploited for political purposes
Second, the university should demonstrate that acceptance of suci
money did not mean that it also accepted ''the repressive behavio
of the South Korean Government." They urged that these issues b
given "the full attention of the university community" before an
offers were accepted.

Dr. deBary responded in a letter to the Spectator on April 1^
1977. He explained that after consulting with his colleagues, h
had taken advantage of the trip to Korea to further the East Asia
studies fund drive by talking "while in Seoul with educations
officials, business leaders, and Columbia alumni about our hope
for the development of Korean studies." Regarding his meetin
with President Park, he wrote, 'There was no time for currer
politics, no occasion for either of us to coopt the other."

Dr. deBary later met with concerned students to discuss his t -ij
He told the students that he was aware of the possible publicit
uses by the ROK of his trip but that he had felt he could avoid an
problems in this respect. In response to a question, he said thg
Prof. Kim Wan Hee's role had been to assist with travel arrang(
ments and appointments. He noted that he was planning to retur
to Asia, having been invited to speak at a conference of scholars i
Japan in late May and early June, and would probably visit Kore
again at that time.***

Sometime after Dr. deBary's first trip to Korea and possibl
before the second. Professor Ledyard individually and informal!
asked about 10 of the graduate students in Korean studies ho
they felt in general about the university approaching Korea
sources for funding. Only two opposed the idea.*® Nevertheless,
was clear that at least some felt there was a need to proceed ver
carefully because they had been among those who signed the Apr
25 letter to the Spectator. Furthermore, a number of students an
some faculty members in East Asian studies have expressed resen
ment over the secrecy with which the negotiations were conducted

In late May, Dr. deBary took the new $1.5 million proposal i
Korea. Once again, Professor Kim went to Seoul to give son
assistance. DeBary did not meet with Korean Traders Associatic
officials, but did meet again with the Minister of Education, Hwar
San-Duk. Hwang was enthusiastic, but made no promises. Whi
deBary was in Seoul, an article incorrectly asserting that the KG
Government had offered Columbia $1.5 million appeared in tl
New York Daily News and was picked up by the Korean pres
DeBary felt he was in an awkward position because it appeared 1
was trying to manipulate the Government into making the gran

Back at Columbia, Dr. deBary heard nothing officially for son
fime but was informed that the Government, uncertain about ho
to proceed, was considering having a separate foundation mal
contributions to foreign universities.®* In a letter to deBary daU
July 30, 1977, Minister Hwang referred to their discussions in Jui
"about how to assist the program and activities in the field
Korean studies at Columbia University and about the share to I

»• Contemporary memorandum of this Apr. 27, 1977, meeting in the subcommittee's possessi
written by a student participant.
•« Staff interview with Prof. Gari Ledyard on Sept. 21, 1978.
•'Staff interview with Dr. deBary on May 11, 1978.

277

aken by the Korean Government in creating the fund for Korean
tudies." He went on to say:

Concerning this matter, I would like to inform you that we are now examining a
ew plan to let one of the non-governmental foundations presently providing fman-
al aid to higher educational institutions or research organizations for their re-
iarch programs help the Korean studies at your university, considering the current
^te of things in your country and the prevailing atmosphere among the faculty
lembers concerned at your university. Such non-governmental foundations will
elp annually Columbia and other institutions in and out of the United States with
le expenses needed in the year for the furtherance of the Korean studies."

, On August 18, Minister Hwang wrote again to say that a deci-
ion had been made

' lead the Korean Traders Scholarship Foundation, a non-governmental foundation
-esently prox-iding financial aid to educational mstitutions or research organiza-
ons. to take charge of all the tasks assisting Korean studies abroad. The said
3undation will not help create an endowment for Korean studies in principle, but
ill provide financial assistance annually as I wrote in my last letter. Thus it is
•gretted that we cannot proceed according to the program of granting U.S.
!00,000 for an endowment."

[e explained that instead there would be annual grants of approxi-
lately $18,000 for 1977, $36,000 for 1978, and $54,000 for 1979. If
r. deBary accepted the plan, he was to apply through P. J. Koh,
16 secretary general of the Korean Traders Scholarship Founda-
on.

I Minister Hwang's letters made it clear that the KTSF had been
3signated by the ROK Government to make the grant to Colum-
ia and implied that the decision to use a private foundation was
lade to avoid some of the controversy which might attend a Gov-
•nment grant. However, whether the money came from a private
orean source or the Government did not become a major issue at
'olumbia. According to Dr. deBary, Columbia's position was that
3 long as the university was free to use the money for its own
)als without strings, it did not matter who the source was.**
On September 6, 1977, before receiving any communications from
3Bary, P. J. Koh wrote to inform deBary that he would arrive in
ew York on September 20 to discuss the KTSF assistance pro-
-am. When Koh met in New York with Dr. deBary and Columbia
resident, William McGill, Columbia took the position that the
•nail annual grant was not adequate for the development of
Korean studies and urged that there also be a grant of $250,000 to
aprove the library and study facilities for Korean studies. In a
tter to Minister Hwang of August 8, deBary had pointed out that
le library project "will be of undeniable and enduring cultural
ilue. It is noncontroversial, and cannot be misrepresented by
lose who seek to discredit the generous intentions of your govern-
ent:"" In a cable of Augiist 22 to Prof. Koh Byong-ik of SNU, Dr.
iBary had described the importance of this larger grant.
;It is essential to have proper home for new activities and make decent public
ipression on launching a program. In view of publicity which has surrounded this
oject it is important that initial announcement include some bold positive step
:e the creation of the new facility, otherwise the impression may be given that we

"Minister Hwang's letter to Dr. deBary is printed in appendix, C-182.
" Minister Hwang's letter to Dr. deBary is printed in appendix C-184.
** Interview with Dr. Wm. Theodore deBary on May 11, 1978.
'^ Dr. deBary's letter to Minister Hwang appears in appendix C-183.

278

are off to a small and uncertain start or that we have backed off in the face oj||
criticism."*

After the September 20 meeting, Columbia submitted proposalsijiii
to the KTSF for two grants: $18,000 for strengthening Koreanj
studies and $250,000 for the Korean library and study center. Onj
November 29, P. J. Koh sent two letters to Dr. deBary informing!
him that the KTSF had approved both proposals. The grants were«
announced during the last week of the first semester in a general!
notice about the success of the East Asian fundraising drive. Thel
timing of this announcement was natural since the university itseli' f
did not receive notice until the first week in December. Neverthe-jf!
less, an editorial in the Columbia Daily Spectator of January 24,1
1978, accused the administration of making the announcement atj
this time in order to leave no time for reaction by faculty and^
students. Reiterating a point made previously by the Spectator, thej
editorial asserted that this was a controversial grant which had not
received the full and open discussion it warranted. The university,]
administration has maintained that such discussion took place, l

Dr. deBary, with a long-standing interest in academic exchanges,j i^
had discussed the possibility of an exchange program with SNU, L
officials on his first trip to Korea. Some time after his second trip,^ ^
Columbia prepared a draft agreement for an SNU-Columbia pro-i^,
gram. It provided that SNU supply an unspecified amount of fund-j |
ing, with matching funds from Columbia. The money would bej|,
used to support a broad Korean studies program including an\^^
exchange of faculty members. Apparently because SNU was tOj^j
provide funds, the draft also provided that "the chief academiCji
officer of Columbia University shall report annually to Seoul Na-j|]
tional University on the programs and expenditures for that year^fj^
and on the proposed programs and expenditures for the foUowingj jju
year," but did not provide that SNU make an annual report. After j i,
the meeting in September 1977 between deBary, university presi-! Ij
dent William McGill, and P. J. Koh, this draft was revised and sentj ii
to SNU. The provision calling for SNU to supply funds had beemij
amended to provide that funds were to be sought from "appropri-j Is
ate governmental and private sources." Columbia was to apply toi ij^
American foundations as well as to the KTSF. The provision call-iimi
ing for an annual report by Columbia's chief academic officer fors i
SNU was not changed. in

The ensuing negotiations over the final draft were conducted byl al
Prof. Gari Ledyard for Columbia and Prof. Koh Byong-ik for SNU. h
Several months earlier. Professor Ledyard had expressed concern 1 0a
about possible problems with an exchange program. In an inter- ^ «
view with the Columbia Daily Spectator Ledyard said, "An ex-' ^i
change program is a potentially dangerous thing. You can get valid J *
people in an exchange program. On the other hand there are many '^
people who, related to the government, might use the program for
political purposes." «^ Ledyard's own view was that Columbia did
not need academic exchanges to develop its Korean studies pro-
gram.

Mis

•• Dr. deBary's cable to Professor Koh is printed in appendix C-185. ( J

•' Interview with the Columbia Daily Spectator, Aug. 5, 1977, cited in a Daily Spectator article*' ;
of Oct. 13, 1977. 1

279

Within the Columbia faculty, the view was expressed that the
)nditions of the exchange program, especially the provision for an
[inual report from Columbia to SNU on all aspects of the Korean
iudies program, would give the Korean side a kind of control
hich it had not been able to get at Harvard. The new Korean
ractice of giving annual grants instead of endowments was also
jen as a way to retain more control. Later, there was some faculty
)ncern that SNU intended to exercise influence over Columbia's
iternal academic affairs by insisting that the proposed advisory
>mmittees at Columbia and SNU have jurisdiction over the whole
•ogram rather than just the exchange program.
In a letter of December 10, 1977, to Professor Koh, Professor
3dyard sought to change the provision for annual reporting to
;iad:

The chief academic officers of Columbia University and Seoul National University
lall issue annual reports on their activities in connection with the exchange
pgram; these reports shall cover the year completed and the program planned for
I'e following year. (Italics added.) "

Ledvard said that the prior provision calling for reporting only
1> Columbia seemed to come from the period when it was thought
iat SNU would provide funds. He preferred mutual reporting
I'jcause it would relate to the program actually planned and would
] cognize the fundamental equality of the two universities.

In his reply, Koh did not oppose mutual reporting. However, he
<d state that it was SNU's position that the proposed advisory
immittees should be given jurisdiction over the whole program
i stead of just the exchange program. He argued, "'Exchange' is
udeniably an important activity but it is, as we see the nature of
1e program, only part of, or a component activity of the whole
j'Ogram." Koh added that adoption of his suggestion would make
i unnecessary to restrict the provision on mutual reporting to the
I change program.®®

In his response, Ledyard urged Koh to accept Columbia's position
listricting the scope of the jurisdiction of the advisory committees
J id of the annual reporting. He stressed that activities other than
\e exchange program were part of Columbia's ongoing Korean
jogram and would continue with or without the exchange pro-
|am. They were ''independent activities of Columbia University
Md must be administered wholly by Columbia University. * * * I
J a sure you will understand that Columbia's academic program
mst be independent of any outside control." ^°

In the end. Professor Ledyard's arguments prevailed. The final
ireement, which was signed by the presidents of the two universi-
lis in May 1978 and announced in the University Record in Sep-
Imber 1978, made it clear that the only part of the Columbia
])rean studies program over which SNU had any control was the
i :ulty exchange program.

. University of California at Berkeley
The East Asia Center at the University of California, Berkeley,
MS funded in large part by the Ford Foundation until 1976, at

Professor Ledyard's letter to Professor Koh and an enclosure are printed in appendixes
(86andC-187. , . j. ^ ,00

' Professor Koh Byong-Ik's reply, dated Jan. 27, 1978, is printed in appendix C- 188.
'Professor Ledyard's letter, dated Feb. 21, 1978, is printed in appendix C-189.

280

which time the foundation awarded a final grant, contingent upon .
matching funds being raised elsewhere. The university's ap-ir
proaches to Korean sources were part of a larger fundraising effort
to raise these matching funds, spurred in part by the grant to
Harvard University the year before.

Prof. Robert Scalapino conducted all negotiations for Korean
funds. University officials told the subcommittee that all initial
contacts in Korea he made were with university alumni and repre-
sentatives of the KTA. Professor Scalapino told the subcommittee
that officials of the Korean Government were not involved at anj
point in the negotiations for the grant to Berkeley.'*

Despite not having discussed the university's fundraising efforts
with any Government official on a visit to Korea in the summer oj
1976, Professor Scalapino himself received an unsolicited offer oji;;
$5,000 for research from the Korean Vice Minister of Educational
Cho Sung Ok. He rejected this offer. j[s

Although the university had requested an endowment of $1 mil,d
lion, the eventual grant from the Korean Traders Scholarship jji
Foundation was for $75,000 over 3 years, conditional upon a writi'=
ten proposal for its use and annual reports on programs funded
Severad faculty members told the subcommittee that this amoum^ ,,
represented interest on a much larger sum which would be grantecif
to the university after the 3 years, on the assumption that thti^
donor was satisfied with the use to which the university had puii^f
the initial grant. It was the understanding of several of theat^^
faculty members that the university did not receive the endowmen^ij
in 1977 because of the adverse publicity such donations were re^?^]
ceiving in the United States as a result of the Korean scandaJ'bf

Thus far, the university has used the grant to fund a symposiunifi
on Korean-American economic relations, language instruction, ac
quisition of library materials and planning for an upcoming confeii
ence on Korean legal institutions to be held in the spring of 197£,
Korean Government officials participated in the symposium o]
economic relations.

The subcommittee was told that neither the ROK Governmen
nor the KTA suggested the projects to be funded by the grant. On
faculty member involved in the symposium informed the subcoKj
mittee that it was Berkeley's understanding that topics involvin
Korean politics were to be avoided.'^

University of Washington

The University of Washington in Seattle is part of the Stat
university system and is funded primarily through appropriatior,
from the State legislature. The Korean studies program at th
University of Washington has been one of the largest programs i
the United States for the past decade. Until the summer of 197*
the university made no effort to secure funding from Korea
sources, relying instead on funds from the legislature and tl^
Federal Government under the National Defense Education Ao

During the summer of 1976, Prof. George Beckmanh, dean of an
and sciences, went to Korea to discuss an academic conference witi
officials of Korea University. While in Korea, he also discussmi

" Interview with Prof. Robert Scalapino, May 24, 1978. Hji

" Confidential staff interview. May 24, 1978. ""

I 281

finding for the university's Korean studies program with Korean
liofessors and one Government official, Blue House adviser Kim
loing Won. The following fall, a Korean consular official from
5n Francisco offered to provide financial assistance to the univer-
sy from the Korean Government. Professor Beckmann turned
csvn this offer because he felt tjiat faculty opinion was against
£3epting money from the ROK.^^

^en the issue was raised concerning outside funding for con-
t.uing a position in Korean literature in the spring of 1977, Pro-
isor Beckmann suggested Dr. Robert Garfias, vice provost for
f :ulty development, write the Korean Consulate in San Francisco
fid Dr. Kim Kyung Won, the Blue House advisor with whom
Ickmann had spoken the year before. Garfias' subsequent letters
aced for the assistance of the Korean Government in "helping us
sect a senior professor from Korea in Korean Languages and
I:erature, or some related field" and further suggested that this
pfessor be "selected and appointed through ♦ * * [the Blue
l)use], or through the Ministry of Education." '^^ Dr. Garfias told
t i subcommittee that he asked for the assistance of the Korean
C vernment in selecting a professor because it would be providing
fids for the position. ^^ University President John Hogness told
tj subcommittee that he saw copies of Garfias' two letters a
D'jnth after they were written. He stated that asking for Korean
C vernment assistance in appointing a university faculty member
vnt against university policy on solicitation of financial support.
} was troubled by the matter, but told the subcommittee that no
bter of correction weis sent to the Korean Government.'^

^. J. Koh, secretary general of the Korean Traders Scholarship
lundation, personally traveled to the University of Washington
0 September 12, 1977 to convey his foundation's response to Dr.
Crfias' letter. He arrived on campus before the letter announcing
h visit, and few faculty and administration officials were avail-
s'e to meet with him. Koh, misunderstanding, felt he was being
s mned.

<oh's response to the university's request for financial assistance
vs a written offer of $20,000 to support the Korean studies pro-
gim for 1 year, an offer which Dr. Suh Doo Soo, retired professor
0 Korean literature, agreed to convey to university administration
oicials.'^^ It was the understanding of the few faculty members
V 0 met with Koh that the grant would be $20,000 each year for a
p *iod of 3 years.

Vhile in Seattle, Koh also met with a group of students and
nmbers of the Korean community in the Seattle area who had
one together to secure continued funding for a position at the
uiversity in Korean literature, a position formerly held by Prof
Sh Doo Soo.

Che KTSF offer of assistance was rejected by President John
Igness in a letter to Koh, dated October 3. The reason was
p ncipally the adverse publicity created in the university commu-

Interview with Prof. George Beckmann, May 23, 1978. , o iqi

■Dr. Robert Garfias' two letters appear in appendixes C-190 and C-191.
Interview with Dr. Robert Garfias, May 22, 1978.

Interview with President John Hogness, May 23, 1978. „^^ , i- *• f e

P. J. Koh's letter offering the University of Washington $20,000, and an application form for
a rSF grant, appear in app)endix, C-192.

282

nity by publication in the university newspaper of excerpts of on
of Dr. Garfias' letters. "^^

As of October 19, Koh had not received President Hogness' lette
He had, however, received copies of newspaper articles which crit
cized the university for asking his Government for assistance i
appointing a university faculty member and urged the universil
to decline any offers from Korean sources.

On October 19, the Foreign Area Committee of the Korean Trai
ers Scholarship Foundation met and established August 8, 1978 i
the deadline by which the university would have to respond to tl"
offer.

That same day, October 19, Koh expressed his displeasure ovc
the treatment he had received in Seattle to Washington's Gra
Dixie Lee Ray during her visit to Korea to promote trade betwee
the State and the ROK. According to Koh, Governor Ray w^t
"shocked" at Koh's story, apologized on behalf of the universiij
and noted her intention to look into the matter.

Koh first learned of the university's decision not to accept tl
funds the following day, October 20, when he received news fro:
New York that an article in the Columbia University Daily Spect
tor stated, "Ten days ago, the UW administration turned down a
offer of $60,000 financial assistance from the KTA for its gradual
studies in Korean languages." '®

On returning to Washington, Governor Ray met with Profess«
Suh and the committee of students and Korean community repr
sentatives. They expressed their interest in funding for the liter
ture position, if necessary through money from Korean source
Ray later called university president Hogness and urged him
meet with Professor Suh and the committee members. Two faculi
members told the subcommittee that Ray also expressed her co:
cern that the university's refusal to accept the funds might ]
detrimental to trade relations between the state and the ROK

In a staff interview Hogness said that he met with the committ<
on April 25, 1978. He told them that continued state funding for
position in Korean literature would not be forthcoming, but th;
the university was still seeking outside funds. Further, the unive
sity would look into making another proposal to the Korean Tra
ers Scholarship Foundation.

A week later in a letter dated May 4, Hogness wrote the Gove
nor that the university had " * * * initiated new discussion withj
the university regarding the possibility of additional outside sui
port for this program including support from Korean sourcesf

However, university officials told the subcommittee that the?
were no current negotiations in progress between the University
Washington and Korean sources and that no new proposals
been submitted to the foundation.

}

"Interview with President John Hogness, May 23, 1978.

"The above description of P. J. Koh's activities and views is based on his letter to Prof. &]■«
Doo Soo, dated Oct. 20. 1977. jft

~> An aide to Gov. Dixie l.ee Ray, Paul Bender, told the subcommittee on Oct. 9, 1978 that
was unable to confirm this statement by Governor Ray, but said the ROK "is one of the Stal
best trading partners and we wouldn't want anything to upset this trade."

283

American University

American University, a private liberal arts university in Wash-
igton, D.C., has long had an international studies program but
(fered few courses on Korea. In the fall of 1975, the vice president
Jr faculty development, William Ahlstrom, approached Hancho
]m, a trustee of the university, to ask if he would contribute
liancially to the international studies program. Kim responded
js^orably. Shortly thereafter, Ahlstrom arranged a meeting be-
1 een Kim and Nathaniel Preston, the vice president for academic
i Pairs." At the meeting on October 2 Preston got the impression
tat Kim was willing to contribute an unspecified, but modest
aount."

Based on this understanding, a rough proposal was drafted re-
(esting an unspecified amount of funds to finance administrative
C3ts for a modest program to increase recruitment of foreign stu-
cnts and to expand the English language program for them. This
pposal was submitted to Hancho Kim late in October. Preston
td the subcommitteee that after reviewing it, Kim criticized the
jDposal and noted that he wanted the focus of the proposal to be
sident exchanges with Korea and Korean studies. Preston in turn
i?ed that the grant be used to fund a program with a wider
i:ernational focus. Preston felt he had convinced Kim, and the
liversity began working on a revised proposal for approximately
} 5,000 to finance an expanded international studies program.

During the course of negotiations, Kim invited Preston to dinner
s/eral times. On one occasion at Kim's home, Preston was shown
£ -novie extolling the achievements of President Park Chung Hee
gd was given various publications on the ROK.

iVhen Preston presented the second proposal to Kim on Novem-
Ir 18, 1975, Kim rejected it, expressing dissatisfaction that it did
rt focus on Korean studies. He further stated that the university
\A underestimated the amount he was willing to donate and that
\ intended to give $300,000. Preston told the subcommittee that
r further negotiations were undertaken and no additional propos-
a made because of the differences between Kim and the universi-
t over the nature of the program to be funded. Preston was tired
c arguing the same points and felt that Kim did not understand
tit it was the responsibility of the university, not the donor, to
d:ermine what programs were needed.*^

t was later revealed that Hancho Kim received large amounts of
r.ney from the KCIA for his activities in the Washington, D.C.
aja. KCIA official Kim Sang Keun testified that he made two
Ferments of $300,000 each to Hancho Kim, one in September 1974
ad the other in June 1975. He received the money through the
d)lomatic pouch and was instructed to deliver it to Hancho Kim.
Iincho Kim told him the money was to be used for activities to
a/ance Korean interests in the U.S. Congress, executive branch,
ad media and academic communities. Further, Hancho Kim told

Interview with William Ahlstrom, Sept. 22, 1978.

Interviews with Nathaniel Preston, Sept. 19 and Oct. 10, 1978. j • , j

Ibid. According to an attorney for Hancho Kim, it was the university that proposed includ-
u Korea in the student exchange program. He further stated Kim did not actually otter
$• ),000, but suggested that the university was proposing to spend far too little on its expansion
0 le international studies program and thought it should spend about $300,000. Staff mterview
^KX. 11, 1978.

284

him that Gen. Kang Young Hoon suggested making a contributic
to American University.®^

University of Southern California

In August 1975, Prof. George Totten and Prof. Lee Moon Cha'
traveled to Korea to set up a student exchange program wil
Yonsei University. While in Seoul, they met one of Professor Tc
ten's former students, an employee of the Korea Explosives C<
who indicated that Kim Chong Hee, the president of Korea Expl*
sives, was willing to give financial help for Korean studies at US<
Professors Totten and Lee next met a high official of Korea Expl
sives who offered a sum of won equivalent to $15,000 to be spent i
Korea and used only to support Korean studies. The offer wji
accepted. To date, the money has been used to support the studiij
of two use students in Korea on the exchange program wit
Yonsei."

In February 1978, president John Hubbard and USC Profess*
Lee Changsoo made a 6-day trip to Korea at the invitation of
Korean organization called the International Cultural Society
President Hubbard gave a talk on cultural exchange, the status
Korean studies in the United States, and related topics. Accordii
to Professor Lee, there was no discussion of USC fundraising (
this trip."

The subcommittee heard allegations from several sources indica
ing that USC had received or was negotiating for a large gra]
from Korea Explosives or the Korean Government. One universr
official stated that negotiations were in progress, but they we:
between the university and the Korean Traders Association (KT^
and had been handled by President Hubbard. These negotiatioi
were reportedly for a grant of $60,000 a year for 5 years and involve
discussions with ROK Government officials as well as officials fro
the KTA,«® Subcommittee efforts to examine these negotiatioi
further were unsuccessful, in part because they were undertaki
very late in the investigation.®*

APPROACHES TO U.S. SCHOLARS AND RESEARCH INSTITUTES

The scholar has always been held in particularly high esteem j
Korean society. The Confucian notion of special respect for leatj
ing and learned persons is deeply rooted in the Korean miiii|
Koreans treat American scholars with the same kind of respa
They are also aware that the views of American scholars influen
government policy and public opinion. They know, too, that Ame,
can professors sometimes become high government officials in po
tions affecting policies toward Korea. It is not surprising, therefoi

'* "Korean Influence Investigation, Part I," hearings before the Committee on Standards
Official Conduct, U.S. House of Representatives, 95th Cong.. 1st sess., Oct. 19, 20, and 21, 1'
(hereinafter referred to as "House Ethics-l"), pp. 52-75; staff interviews with Kim Sang Kei
See pp. 290-293 for further discussion of the activities of Gen. Kang Young Hoon. ^

" Interview with Prof Lee Moon Chan, July 24, 1978.

** The subcommittee has little information about this organization or its activities. Accord
to the Korea Herald of Feb. 7, 1978, Hong Sung-chul is its president (see p. 145 of this rep<
and Kim Kwang is one of its officers (see pp. 125-126; 129-130; 134-136; 140; 154-155).

" Interview with Prof Lee Chang Soo, July 24, 1978. ,

•• Interview with Dr. Henry Birnbaum, President's Assistant for International Programs, i^W-
5,1978. m\

•• The subcommittee attempted on several occasions to speak with university president, J( '
Hubbard, but its calls were not returned.

285

at the Korean Government strove to encourage supportive atti-

des among American scholars.

The ways in which the Korean Government sought to influence

merican scholars varied. They included trips to Korea, support
:r research papers, sponsorship of academic seminars (both covert-
; and overtly), awards of honorary degrees, and maximum public-

V to scholars during visits to Korea. Some of these efforts are
(Scribed below.

U.S. scholars

, A great many scholars applied for or were offered grants by the
^brean Government for research or travel to Korea. Therefore, it
^is not possible for the subcommittee to look into all the cases
nich came to its attention nor to attempt to look for all cases.

In some of the examples discussed below, the person offered the
^ant refused it. In other cases the grant was accepted. This was a
cestion for each person to decide according to his or her own
cnscience, and the subcommittee does not intend to imply that
ry scholar was improperly influenced. Rather, it looked at the
1 enomenon as an example of an ongoing, systematic effort by the
DK Government to improve its image in the academic world.

Section 1 of the 1976 KCIA plan, entitled "Operations Against
te North" linked the LaRocque Research Institute with a united
1 )nt of anti-ROK factions being promoted by the DPRK and called
i' coopting the Institute.^ The reference was to the Center for
l^fense Information headed by Adm. Gene R. LaRocque (retired).
Action 2C of the plan, "Operations in Media Circles," under the
|al of "Frustration of Northern Puppet Infiltration of U.S. Media
(rcles" called for inviting Admiral LaRocque and Dr. Leslie
Jmbar of the Field Foundation to Korea and coopting them.^^

Admiral LaRocque testified before the subcommittee that he had
It been invited to Korea in 1976 but he had been in 1975. After a
Lcember 1974 newspaper article by LaRocque calling for the with-
cawal of U.S. troops from Korea, he had been asked to come to
l)rea and address the Korean War College about his views on
t)op withdrawal. In February 1975, he made the trip, accompa-
1 3d by Dr. Dunbar, at ROK Government expense. He testified that
te Center for Defense Information's usual practice was to pay for
tivel to and from a country visited, while the host usually paid
cly in-country expenses. In this case, the ROK paid travel ex-
inses as well.*^

[n his testimony. Admiral LaRocque expressed complete agree-
imt with the conclusion stated by Dr. Dunbar in a report he
\ote about their trip.

t begins to become clear why the South Korean Government wanted us— i.e.
IRocqiie— over. The retention of American troops seems almost to be the highest
F ority of the governmental establishment, insofar as we met it. The Koreans, a
\y sophisticated people, are astutely aware of the growing independenceof Con-
g ss, and of the influence which a few persons such as Gene have with it. They are

V rriedly concerned also with changes in American public opinion."^

KI-3, pp. 59-69, 118; see also appendix C-85.
KI-3, pp. 59-69, 128; see also appendix C-85.
KI-3, p. 60.
Ki-3, pp. 62 and 158.

286

Shortly before the trip, Admiral LaRocque had received a teJ
phone call from the Korean Embassy inquiring whether he wou
accept an honorary degree from a Korean university while
Korea. LaRocque testified in his view the Government arrang<
this to dispose him more favorably toward Korea and to change h
position on troop withdrawal. Asked if he was not flattered by t]
degree, Admiral LaRocque said "Not in the least. * * * I knew wl
I was getting that degree. I felt I would go along with it just to s
how far they would really go." ^* i

Another section of the 1976 KCIA plan dealing with ''Operatic:
in Academic and Religious Circles," began with the goal of char
ing the attitudes of anti-ROK scholars in the United States,
accomplish this, the plan proposed inviting two such scholars
Korea and co-opting them.^^ One of those scholars was Stefj
Leader, also of the Center for Defense Information. In an article
the Defense Monitor which was written largely by Leader, t
center had taken the position that U.S. troops should be withdraw
from Korea because they were not necessary to maintain peace
Korea or to defend Japan. Further, the United States should
very careful in giving military aid to the ROK "so as not to provi«
offensive capabilities that would threaten North Korea and furth
raise tensions on the peninsula." ®« Leader testified that he hi
been told on several occasions in 1976 by Col. Choi Yae Hoon, t
deputy military attache at the Korean Embassy in Washingtc
that Colonel Choi was making arrangements for Leader to vl«
Korea. Leader was concerned about the question of whether trav<
ing at Government expense would compromise his objectivity. I
never had to make the decision because Colonel Choi was recall
to Korea in the wake of some controversy over an alleged offer tcl
Member of Congress. The subject of the trip was never rais«
again. Leader testified that he was suspicious that Colonel Cb
was a KCIA official.^^ Kim Sang Keun, a former KCIA official
the Embassy in Washington, coniirmed that Choi was a KCI
official.9*

The other anti-ROK scholar targeted in this section of the ph
was Prof. Jerome Cohen of Harvard, a well-known critic of t
Park Government.®^ Although he did not receive an invitation
1976, as was often the case, the plan reflected an action previoui^
taken. Professor Cohen had been invited in April 1975 by Pr^
Park Choon Kyu of Seoul National University. Professor Park h.
accompanied a group of students from the Korean War College i
Washington as their academic adviser. On his trip, he went
Cambridge to see Cohen, accompanied by a Lee Dong Bok who w
introduced as an official of "a security agency." A letter of inti
duction to Professor Cohen stated that Professor Park had be^
active in public affairs as an adviser to the North-South Red Crci
talks and a member of the ROK delegation to the United Natioji

•« KI-3, p. 66. !

»*KI-3, p. 131; see also appendix C-85.

»• "Korea and U.S. Policy in Asia," Defense Monitor, Center for Defense Information, W«
ington, D.C., vol. V, No. 1 (January 1976), reprinted in KI-3, pp. 142-149.

•^ KI-3, pp. 44-49.

•• Based on staff interviews with Kim Sang Keun, the subcommittee compiled a list of
officials in the United States. This list, which included Colonel Choi Yae Hoon, was con:
by Kim in testimony before the subcommittee. See KI-5, pp. 59-60.

•• See p. 269 of this section of this report.

287

le letter also asserted that, to the writer's knowledge, Professor

ark was a good friend of President Park Chung Hee. Professor

')hen deflected the invitation by stating that he would visit Korea

whenever he made a trip to East Asia, just as he had in the past.^'X'

Prof. Lee Chong Sik of the University of Pennsylvania was tar-

|ted in another section of the 1976 KCIA plan. His name and

liversity affiliation appeared in a section calling for inviting in-

lential Korean scholars living in the United States to visit

Drea.^®* In testimony before the subcommittee. Professor Lee said:

dne of the reasons I was selected as a target, I suppose, is that I have been

(tical of the pohtical measures taken by President Park since late 1972. The

I )ject to influence, then, is corollary to the alienation of Korean- American schol-

li, and this was caused by dictatorial measures of the Korean Government. ^°2

Professor Lee was not invited in 1976, but he had been invited in
«rly 1975 to continue discussions already begun with Ambassador
] m Dong Jo about the possibility of funding a Korean chair at the
hiversity of Pennsylvania. In the summer of 1975, Lee was asked
\ someone in the Korean Embassy if he would attend a confer-
( ce of the National Unification Board in Seoul. In both cases, he
1 fused. In December 1976, Professor Lee received an unsolicited
( er of "$3,000 as a partial research grant" in a letter from Park
he Kyoo, the education attache at the Embassy. Park stated that
^ ce Minister of Education Cho Sung Ok had informed him of the
jailability of the grant. Professor Lee again refused.

Later, after Vice Minister Cho resigned and became president of
(lungnam University, he made a trip to the United States under
id sponsorship of the U.S. Department of State leadership pro-
gam. While in Philadelphia, he met Professor Lee and reiterated
t3 offer. Professor Lee once again declined. ^^'^

[n the summer of 1976, Cho Sung Ok also offered Prof. Robert
^alapino of the University of California at Berkeley an unsolicited
5.000 grant for personal research. He also declined.*®*

3n other occasions, the KCIA paid Korean-American scholars to
\ ite academic papers on international relations issues. For exam-
fj, in 1972 Prof. Kim Ilpyong of the University of Connecticut was
£ied by Choi Hong Tae, identified by Kim Sang Keun as a KCIA
cicer in the Korean Embassy, to write an article on United
Sites-Soviet relations. *°^ Professor Kim was to be paid $500 for
ijearch and another $500 upon completion of the paper. The first
530 check was drawn on Choi's personal account and not on an
Iibassy account.*^ Choi said that Kim's article was to be one of a
sies written by Korean- American scholars, all requested by Kang
I Dok, head of the Far Eastern Institute in Seoul and a KCIA
cicial. The articles were to be published in Kang's journal. East
/ian Review, a publication named in the 1976 KCIA plan as
nterial to be distributed to "promote understanding of the ROK's
suation." *°^

' Staff interview with Prof Jerome Cohen on Nov. 22, 1977.
' KI-3, pp. 27-35 and 133; see also appendix C-85.
'KI-3, p. 28.
' KI-3, pp. 31-33.
' See pp. 279-280 of this section.

•,* Interview with Prof. Ilpyong on Nov. 17, 1977. . ,. , i.^ .

'Copy of check from subpenaed bank records of Choi Hong Tae m the subcommittees
P ession.

KI-3, pp. 125 and 131; see also appendix C-85.

288

The subcommittee does not intend to imply that Professor Ki
acted improperly by writing this article, but simply cites it as £
example of how the KCIA interacted with the Korean-Americe
academic community. The subcommittee received evidence indica
ing that the KCIA paid others through Choi Hong Tae for similj
academic articles. ^°*

According to the 1976 KCIA plan, Dr. Joseph Schiebel, a profe
sor of Russian history at Georgetown University, was to be used I
having him sponsor a conference on ROK security issues and pu
lish the proceedings. ^°^ According to one of his students, Kim Seui
Hwan, Dr. Schiebel did participate in a conference on the People
Republic of China, but was not involved in any academic confe
ence on Korea."®

The 1976 KCIA plan also stated that Dr. Schiebel had be(
contacted and invited to Korea in May 1975. The subcommitt<
learned that Dr. Schiebel and his wife did in fact visit Korea
that time. However, Dr. Schiebel was unaware that he had be^
targeted by the KCIA. In the spring of 1975, he and his wife we:
in Asia for a year's sabbatical from Georgetown. While in Tawia
they had received an invitation to visit Korea from Kim Seui
Hwan's father. Dr. Kim Dong Ik. According to Kim Seung Hwai
the invitation was made purely at his suggestion and not on behsj
of the KCIA or Korean Government. The Schiebels had been Kiro
host family when he came to Washington, D.C., in 1973, and thii
and his parents had become acquainted through letters as
result."^

While in Korea, the Schiebels stayed with Kim's parents, wli
bore all their expenses. Dr. Schiebel stayed about 8 days, met wii
Korean Government officials, and was given a tour of the DM'
One of the officials was Hwang Moon Young, chief of the Ameriw
section of the KCIA. In discussions with the officials, Schiebi
expressed his opinions openly and in many instances criticized tl!
policies of the Government. "*

Former KCIA official Kim Sang Keun told the subcommittee 1
received several hundred dollars a month from KCIA headquarte
which he delivered personally or mailed to Kim Seung Hwa
These payments are reflected in the records of Kim Sang Keur
bank account. Kim Sang Keun had taken over responsibility f
these payments from another KCIA official, Choi Hong Tae. I
later transferred the task to Hwang Moon Young, who was trar,
f erred from the American section of the KCIA in Seoul to tl.
Embassy in Washington, D.C. in 1976."^

When questioned about these payments, Kim Seung Hwan stati
that between 1971 and 1975 he had received monthly scholarsh^
payments of $200 from the Institute for International Studies
Hankook University. They were in the form of checks, and he g J
them either by mail from the embassy or directly from the ins#
tute on visits to Korea. Kim could not recall which Embassy of
cial mailed them. According to Kim, the scholarship was award(

'»• Bank records of Choi Hong Tae indicate that he made similar payments to other schok
"» Dr. Schiebel is represented in the published version of the 1976 KCIA plan as "Dr. X
KI-3, p. 132; see also appendix C-85.
"" Interview with Kim Seung Hwan, Aug. 16. 1978.

"' Ibid.; also interviews with Patricia Schiebel on Nov. 18, 1977 and Oct. 5, 1978. |

"» Interview with Patricia Schiebel, Oct. 5, 1978. '

"» Interview with Kim Sang Keun, Oct. 2, 1978.

289

X the basis of academic competition, and he was unaware of any
I]IA involvement."*

^search institutes

Hudson Institute

[n an article in the New York Times of December 16, 1976, the
Iidson Institute,"^ headed by Herman Kahn, was alleged to have
±3n used by the Korean Government to influence American think-
i; and policy toward Korea. Officials at the institute told the
ADCommittee that it had been involved in three projects related to
:li ROK. The first was a "Conference on Korean Futures: Scenar-
i( and Predictions," held in 1973."« It was cosponsored by the
i;titute and the Asiatic Research Center of Korea University and
t)k place in Seoul, funded in part by approximately $30,000 from
/D. The remaining costs were borne by the Asiatic Research
Cater. Academicians, corporate leaders, and Korean Government
oicials participated. Herman Kahn told the subcommittee that
Hhough critics of the Korean Government would not have been
^ eluded, invitations to Prof. Edwin O. Reischauer and Kim Sang
^m, publisher of the Dong-A Ilbo, were not sent until Government
aoroval was obtained."'

The second project included a series of consultations with
F dson officials in 1974 and 1975, for which the Bank of Korea and
tl; Korea Development Institute, both Korean Government institu-
te ns, each paid Hudson $25,000. The consultations concerned long-
a i short-term analyses of Korean economic growth to aid in eco-
nnic planning in Korea. Hudson also made an oral commitment
a part of this project to write a book on the economic development
0 Korea and Republic of China, a book that was eventually ex-
pided to include other developing nations as well. Kahn told the
SDcommittee that the institute spent a great deal of its own
nources to complete the project and that it will represent a
fiancial loss to Hudson."®

Cahn informed the subcommittee that he had been asked by
Tne magazine to write an editorial section on South Korea for an
a^ertising supplement, a supplement which was paid for by the
FK business community and published in the August 14, 1978
e<tion. Kahn was paid $5,000 for this editorial section. Although
K hn was paid by Time, Inc. for this section, Time officials told the
SDcommittee that Kahn's name had been suggested by individuals
iithe Korean business community."^ Kahn had on numerous occa-
si[is made favorable statements about the economic growth of
Krea and was apparently considered a valuable spokesman on the
p sent and future state of the Korean economy.

Interview with Kim Seung Hwan, Aug. 16, 1978.

The Hudson Institute, founded in 1961, is a nonprofit research institute in Croton-on-
Hson, N.Y. The institute specializes in research on national security issues and trends in
ec omic and social development.

Interview with Herman Kahn, May 15, 1978.

Ibid. It should be noted that Kim Sang Man is the brother of Kim Sang Hyup, president of
K' ;a University at the time of the Hudson Conference at the university. Criticism of the ROK
G« ;rnment by Prof. Edwin Reischauer also became a troublesome factor in the Korean grant
to arvard University. See pp. 269, 272-273 of this section.

Ibid.

Interview with Harry Steinbreder of Time, May 17, 1978.

290 I

Research Institute on Korean Affairs

One institution established by the ROK Government was i\
Research Institute on Korean Affairs (RIKA), founded by retin
Gen. Kang Young Hoon in the fall of 1970 as a nonprofit, ta
exempt educational foundation. The subcommittee was informs
that General Kang told several individuals he had received tl
initial funds for RIKA directly from President Park Chung Hee.
During subcommittee hearings on March 15, 1978, a declassifi<
summary of U.S. intelligence reports was released which include
General Kang's institute as among the ROK Government lobbyii
activities to be placed under the direction of Tongsun Park (a ph
later rejected). ^^^ Other U.S. Government reports in the spring
1974 indicated that the KCIA in Washington, D.C., was attemptii
to persuade wealthy Korean businessmen in the United States
serve as fronts for KCIA funding for RIKA.^22 Former Director
the KCIA Kim Hyung Wook testified that General Kang requests
and received funds for RIKA from the KCIA.^^a Further, accordii
to the 1976 KCLA plan, General Kang's research institute was ■[
play a major role in influencing opinion about Korea in the U.
academic community. ^^^ | J

Because of these allegations, the subcommittee investigated tl
operations of the RIKA and its financial records. The inquiry r! J
vealed that a large-scale laundering operation had been initiated :\
1971, continuing through 1976, to disguise the source of fundinS™
The subcommittee examined the list of contributors compiled I'l'^
RIKA which formed the basis for its claiming tax-exempt stati^ °!
from the IRS.^^^ A breakdown of the list was as follows: , ,

Clear cases of laundering $173,9, ;.

"Contributions" by Korean officials 100,4' /,

Other contributors 70,7' ^'

Unidentified contributors 41,5' la

Total $386,6 ^j

The laundering process involved either General Kang or Was I
ington-based KCIA official, Choi Hong Tae, who would give cash < Ij
a check to an individual who would then write a check to RIKA f lii
the amount of money given them. Former Korean Governmei li
Education Attache, Kang Kyung Koo, and Baltimore businessmgiil
Lim Kee Seo testified to laundering $36,000 and $10,000, respectiv
ly, in this fashion, ^^e A total of eight individuals told the subcor
mittee that they had participated in this operation. Many oth<
"contributors," including former or present Korean Governmei
officials, could not be reached by the subcommittee.

Of the total income reported to the IRS, the Korean Governme)
and the KCIA provided over $270,000, either directly or throug

'" Confidential staff interviews.

'" "Investigation of Korean-American Relations," hearings before the Subcommittee on Int

national Organizations of the Committee on International Relations, 95th Cong., 2cl sess., Part

Mar. 15, 16, 21, 22; Apr. 11, 20; and June 20, 1978 (hereinafter referred to as "KI-4"), p. \ l>

'"See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," p. li

•" "Investigation of Korean-American Relations," hearings before the Subcommittee on Int ^

national Organizations of the Committee on International Relations, 95th Cong., 1st sess., Pi I %

1, June 22, 1977 (hereinafter referred to as "KI-1"), p 45 *

'" KI-3, pp. 131-132; see also appendix C-85. I %

'" This list is printed in appendix C-193. i k

«~ KI-5, pp. 114-115 and 118-120. . | J

291

the laundering process described above, between 1970 and 1977 to
operate the institute.

Kim Hyung Wook testified that at one point the KCIA director
transferred funding for RIKA from the KCIA to the Korean Trad-
ers Association. An examination of the financial records of the
institute revealed that P. J. Koh and Lee Hwal, officers of the
Korean Traders Scholarship Foundation, assumed full responsibili-
:y for financing the activities of RIKA from late 1975 through its
iemise in 1977.^"

As to the use made of the money, General Kang attempted to
establish RIKA as a legitimate academic institution in the field of
:<orean studies, contributing to U.S. scholarship on Korea. RIKA
Dublished the quarterly Journal of Korean Affairs and other aca-
demic materials, established a library of works on Korea, sponsored
icademic conferences, and supported General Kang's participation
n organizations involved in Korean studies.

The journal contained articles on international relations in East
Vsia, on issues concerning Korean reunification, and on diplomacy
n both North and South Korea. The tone of the majority of arti-
;les was generally conservative, no doubt in part due to the refusal
)f certain critics of the Government to submit articles, since RIKA
vas rumored in the Korean studies field to be connected with the
Government. Nonetheless, the subcommittee found no evidence to
ndicate that the content of the journal was dictated by the KCIA
•r the ROK. On the contrary, its advisory board was comprised of
loted scholars across a wide political spectrum.

In April 1972, RIKA held a symposium on the ''The Major
^owers in the Far East and Korea" at the Holiday Inn in Silver
Spring, Md. When the proceedings of this symposium were pub-
ished in 1973, the institute was referred to as a "sponsor." There
vas no other reference to sources funding the symposium. ^^^

One organization in which General Kang participated was the
nternational Association of the Organization for Korean Studies
lAOKS), headed by Choe Suh Myun in Tokyo. Professor Lee Jai
lyon testified before the subcommittee that Choe was an "opera-
ive" of the KCIA.^" Kang himself had been elected the North
v.merican delegate to participate in conferences sponsored by Choe.
'his election took place at a meeting of lAOKS in 1975 and was
onducted by six individuals invited by Choe. Prof. Andrew C.
^ahm of Western Michigan University was elected the delegate
rom the Korean studies community in the United States. In Octo-
ber 1976, Professor Nahm received $1,500 from Choe to organize a
J.S. council under Choe's international association. It was never
established, however, due to a lack of enthusiasm on the part of
•cholars in the Korean studies field in the U.S.^^°

'^ KI-l, p. 45. See also appendix C-193.

'*• Kim, Young C, eH., Symposium on Major Powers in the Far East and Korea (Silver Spring,
Id., Research Institute on Korean Affairs, 1973).

'""Activities of the Korean Central Intelligence Agency in the United States," hearings
efore the Subcommittee on International Organizations of the Ck)mmittee on International
elations, 94th Cong., 2d sess.. Part II, June 22, Sept. 27 and 30, 1976 (hereinafter referred to as
SIO-II"), p. 6, 30 and 32.

'»• Letter in possession of the subcommittee dated Oct. 25, 1976, from Prof. Andrew Nahm to
hase Manhattan Bank in Seoul, acknowledging receipt of the $1,500 from Augustme Choe.
etter dated June 12, 1978 to the subcommittee from Prof. Andrew Nahm concerning disburse-
lent of Choe's funds.

35-508 O - 78 - 20

292

According to the 1976 KCIA plan, RIKA was also to play a major
role in the KCIA's efforts to influence the U.S. academic communi-
ty. Publications of the institute were to be used to "expose the
fallacies of anti-ROK slander and propaganda." "* Further, Ambas-
sador Han Byung Ki's "P. R. Institute" was to use RIKA to publish
public relations materials for the ROK.*^* One scholar in the
Korean studies field told the subcommittee that he received multi-
ple copies of RIKA publications by mail — from the Korean Embas-
sy, the consulate in New York, and the Observer Mission to the
United Nations.

The KCIA also planned to hold academic meetings in the United
States, using the institute."^ As noted above, RIKA did sponsor one
such conference in 1972. It sponsored another one in May 1974 on
"Comparative Communist Systems: North Korea and East Ger-
many." One participant at this conference told the subcommittee
that RIKA covered all expenses of the conference and paid partici-
pants an honorarium of $600 to $1,000.

The 1976 KCIA plan estimated the annual operational expenses \
of RIKA to be $88,000."* The subcommittee examined the income
tax returns filed by the institute during its operation. They indicat-
ed that RIKA reported receiving gifts and contributions in 1971 of
$88,000. This was another example of an item in the KCIA 1976
plan that actually referred to something in the past.

The KCIA plan also allocated $50,000 for "collaboration" be-
tween RIKA and George Washington University. ^^^ Former educa-
tion attache Kang Kjoing Koo told the subcommittee that in 1974
or 1975 Gen. Kang Young Hoon asked him to secure a grant from
the Ministry of Education for $50,000 to cover the costs of merging
RIKA with the Sino-Soviet Institute of George Washington Univer-
sity. Attache Kang sent this request to the Ministry of Education
and KCIA officials at the Embassy, including Kim Yung Hwan,
KCIA station chief. Although he received no response from the
KCIA, Kang was instructed by the Ministry of Education to contact
the university and report back on the benefits of such a merger.
After talking with officials there. Attache Kang filed a report but
had received no word from the Ministry on the grant prior to his
resignation in 1976. "« Prof. Kim Young Chin of George Washington
testified before the subcommittee that he had been asked by Gener-
al Kang in 1976 to become the editor of RIKA's journal. He also
testified that General Kang asked him if George Washington Uni-
versity would take over RIKA's library, which the university did
not do."^ In the end the merger did not take place.

The Research Institute on Korean Affairs ceased operations in
the- spring of 1977, following General Kang's return to Korea in
December 1976. Kang informed several individuals that he was
leaving the United States because the outbreak of the Korean
scandal was making it impossible to operate RIKA. However,
income to RIKA had risen annually during the last 4 years of its
operation.

•" KI-3, p. 128; see also appendix C-85.

'" KI-3, p. 133; see also appendix C-85.

'" KI-3, p. 132; see also appendix C-85.

'" KI-3, p. 133; see also appendix C-85.

'» KI-3, p. 133; see also appendix C-85.

'»• Staff interview with Kang Kyung Koo on Feb. 23, 1978.

'" KI-3, pp. 50-52.

293

When Kang returned to Korea, he became dean of the School of
Foreign Studies affiliated with Hankook University, a position he
held until February 1978. In that month he was appointed to the
ambassador-level post of Director of the Foreign Affairs and Securi-
ty Institute of the Ministry of Foreign Affairs, the ROK equivalent
of the Foreign Service Institute. ^^®

USE OF ACADEMIC CONFERENCES

The Korean Government and the KCIA used academic confer-
ences to promote their interests as part of their effort to improve
the image of Korea in the United States. In June 1975, Prof. Lee
Jai Hyon testified that part of a KCIA plan discussed at the Em-
bassy in early 1973 dealt with sponsorship of academic conferences,
aimed in part at curbing criticism of the Yushin Constitution in
the U.S. academic community.^^® The 1976 KCIA plan made explic-
it KCIA intentions to use academic meetings to bring about '^ro-
ROK statements and a pro-ROK atmosphere." **°

The subcommittee learned that on several occasions the Govern-
ment financed academic conferences on Korea in addition to those
of the Research Institute on Korean Affairs ^** by covertly provid-
ing funds to sponsors. Two such conferences in the U.S. were
"Korea and the Powers in the 1970's," held in 1973 at the Washing-
ton Hilton Hotel, and "Korea and the Major Powers," held in 1975
at the Key Bridge Marriott Hotel outside Washington, D.C. Partici-
pants told the subcommittee that ROK support was not made
public at the time of the conferences.

; The 1973 conference was cosponsored by the Institute for Asian
Studies, headed by Hahn Kwang Neun, and Kyungnam University
in Masan, Korea, whose president was the brother of former Chief
Df the Presidential Protective Force, Park Chong Kyn.^*^ pj.Qf j^q
Jai Hyon testified that the Korean Government paid all the ex-
penses of conference participants. ^^^

The conference in 1975 was sponsored by the Institute for Sino-
Soviet Studies of George Washington University. On November 29,
1977, Prof Kim Young Chin of the institute testified before the
subcommittee that the conference was financed in part by $20,000
Prom the Ministry of Education. The funds had been sent to the
institute by Korean Ambassador to the United States Hahm Pyong
Dhoon.^** The source of the funds was not made clear to partici-
pants at the time of the conference. The subcommittee was not
aware of any attempt to include or exclude any participant for
political purposes. The conference proceedings were published by
Praeger Publishers, Inc. in 1977.

Kang Kyung Koo, education attache at the Korean Embassy at
:he time of these two conferences, testified that according to stand-
ard procedures, he would have handled disbursement of Ministry of
Education funds in the United States. However, he was not in-
volved in or aware of the financial arrangements for these confer-

'" Article in Korea Herald, Feb. 7, 1978.

"»0p. cit., Human Rights in South Korea * * * p. 180.

•♦" KI-3, pp. 131-33; see also appendix C-85.

'"See p. 292 of this section.

'"Op. cit., Sugwon Kang, p. 30.

'"Op. cit., Human Rights in South Korea ••',?• 80.

'♦* KI-3. pp. 52-54.

294

ences. He indicated that the Ambassador could have made such
donations without his knowledge. He also stated, moreover, that
the Ministry of Education could have made direct donations with- j 1
out going through the Ambassador, and in such a case he would j it
not have learned of it. He agreed that it was possible for such
funding to have come from the Ministry of Foreign Affairs, the
Korean Traders Association, or the KCIA."*

Several other academic conferences on Korea deserve mention.
One — held in Seoul in the summer of 1975^was part of the Second
Convention of the International Association of Organizations for
Korean Studies, headed by Choe Suh Myun of the Tokyo Institute j
for Korean Studies, as noted earlier. According to the Korean-
language prospectus of this conference, it had the ^^support" or
"backing" of the Korean Government.*** Further, the English-lan-
guage prospectus noted that participants were "kindly advised to
abstain from any sensitive statements or acts which may be taken
as 'political.' " '*'

This constraint on academic discussion caused at least one
Korean studies scholar in the United States to decline Choe's invi-
tation to participate.*** The delegates representing Korean studies
in North America and the United States were Gen. Kang Young
Hoon and Prof. Andrew C. Nahm, respectively. Neither was actual-
ly elected by the Korean studies community, however.***

All travel and other expenses of participants were paid by the
sponsor. Participants met with President Park Chung Hee follow-
ing the conference.

Second were two conferences which seemed to correspond to the
intention expressed in the 1976 KCIA plan to "invite 43 Korean
resident political scientists and coopt them" as part of a general
effort to utilize" Korean scholars in the United States. *^° In both
1975 and 1977, joint conferences were held in Seoul by the Korean
Political Scientists Association and Association of Korean Political ,
Scientists. According to a member of the 1975 conference program
committee who also attended the 1977 conference, there were ap-
proximately 40 participants from the United States at both the
1975 and the 1977 conferences. Again, all expenses were paid by
the ROK Government, and participants met with President Park
Chung Hee afterward.

The 1976 KCIA plan also targeted the "American-Japanese aca-i
demic meeting sponsored by Stanford University," proposing to get
pro-ROK scholars to participate in order to "frustrate the Northern
Puppets."*" The subcommittee learned that an attempt was made
to implement this part of the plan. In January 1976 the Stanford j
University Project on United States-Japanese Relations sponsored
an academic conference on arms control and international security
which included a discussion of Korea. In November 1975, former
Minister of Education Min Kwan Shik visited Franklin Weinstein,

>" KI-5, pp. 108-109.

'"Letter dated June 19, 1975 from Prof. Gari Ledyard to Choe Suh Myun. See appendix

>" Op. cit., Sugwon Kang p. 30.
'« See Appendix C-194.

'♦• Op. cit., Sugwon Kang, p. 30. This was confirmed in an staff interview with Prof. Andrew C,
Nahm on May 2, 1978. See also appendix C-194.
"«» KI-3, p. 133; see also appendix C-85.
»• KI-3, p. 132; see also appendix C-85.

295

iirector of the project, and asked that he be allowed to participate.
iVeinstein rejected the request. Later, in January 1976, Yoo Chong
eia, counselor at the Korean Embassy in Washington, called Wein-
5tein and asked that Prof. Kim Young Chin of George Washington
University be permitted to attend. It was also denied. The pressure
continued during the actual conference, this time in the form of
-equests directed at Japanese participgmts.^"

Following the conference, Weinstein was visited by Limb Man
Sung, a KCIA official from the ROK consulate in San Francisco, i"
;.imb wanted to know the contents of the conference proceedings.
5ince the discussions had been confidential, Weinstein would not
iisclose their substance.

1 It seemed clear to the subcommittee that the ROK Government
lad attempted to influence public opinion and the U.S. academic
community by sponsoring, covertly funding, and otherwise influ-
encing academic conferences on Korea. Further, it was apparent
hat these plans were largely directed by the KCIA.

ACTIVITIES INVOLVING KOREAN STUDENTS IN THE U.S.

ROK government concern about its image in the academic world
extended to the views of Korean students attending American uni-
versities. In the case of professors and established scholars, that
concern was primarily with the views they expressed in their aca-
iemic writings and lectures, but in the case of students it was with
heir attitude toward the Government and the activities they un-
lertook in relation to those views. The fact that the Rhee Govern-
nent had been brought down in 1960 by a student revolution with
he support or at least acquiescence of the majority of the Korean
x)pulation was never far from the minds of the Government or the
;tudents. The students saw themselves as the moral guardians of
he political life of the nation, and every controversial measure
-aken by the Government after the fall of Rhee was greeted in
':iorea by student demonstrations.

After the enactment of the Yushin constitution, Korean students
n the United States also became very active in demonstrations and
)ther opposition activities. These efforts were closely scrutinized by
^CIA officials and other Korean Government officials acting in
concert with the KCIA, according to the testimony of former Gov-
ernment officials. Consular officials were instructed to attend dem-
)nstrations and note the numbers and names of student partici-
pants. This information was then sent to Seoul.

Organizers and participants of these demonstrations informed
:he subcommittee that they had received threatening telephone
)alls, some specifically mentioning their anti-Government activi-
:ies.^^* Kang Kyung Koo, former education attache at the Embassy
n Washington, testified before the subcommittee that he called
Jtudent leaders prior to demonstrations to give them "friendly

•" Interview with Dr. Franklin Weinstein on Dec. 19, 1977. See al^: Stanford University
>Iews Service press release dated Dec. 5. 1977; Semas, Phillip W., South Korean Plan to
nfluence Scholars Apparently Failed to Produce Results," The Chronicle of Higher Education,
Dec 12 1977) d 9

■"Limb Man Sung was identified as a KCIA official by Kim Sang Keun in testimony before
he subcommittee on June 6, 1978. The subcommittee also received testimony concernmg harass-
nent of Korean-Americans in San Francisco by Limb. See KI-5, PP- 8'-92. , ^ , a m

'" Interviews with Koh Won on Apr. 10, 1978. and affidavit by Jin Ok Chang, dated Apr. 10,
978, submitted to INS in support of her petition for political asylum.

296

advice" not to demonstrate. This advice took the form of: (1) notify-
ing them that they might not be able to secure jobs on returning to |
Korea; (2) stating that the FBI might be watching them to take !
note of "pro-communist" activity; and (3) suggesting that the Em- !
bassy might cut off financial assistance to the Korean Student i
Association in Washington, D.C.*** Kang further testified that on i
occasion he reported the names of demonstrators to Seoul. A I
former KCIA official, Kim Sang Keun, testified that the KCIA had |
employed an American photographer to take pictures of demon-
strators. These were also sent to KCIA headquarters in Seoul."* I

U.S. Government reports confirmed that the ROK Government 1
was extremely concerned about anti-Government demonstrations
by Korean students and others in the Korean community. The
KCIA devised plans to infiltrate organizations opposing ROK Gov-
ernment policies to undermine their activities.

Officials at several U.S. universities told the subcommittee that
they felt the emergency measures of 1974 made free and objective
participation in discussion of Korean politics by Korean students
difficult if not impossible. Students feared that what they said on
American campuses might be reported back to Seoul. American
students also felt constrained because they did not want to cause
trouble for their Korean friends or preclude their getting visas j
themselves to go to Korea. !

On a more positive note, faculty members noted that intimida-
tion of Korean students had abated somewhat since the inaugura-
tion of congressional investigations of KCIA operations in the
United States. Nonetheless, Korean students were still reluctant to [
engage in political discussions on Korea. |

CONCLUSIONS AND RECOMMENDATIONS

In the 1970*s, the ROK Government was aware of the influence '
of universities and scholars on American public opinion and was
concerned that many American scholars, especially those interest-
ed in East Asia, were criticizing the Yushin system and the activi-!
ties of the KCIA. Therefore, it undertook a number of measures to
improve its image in U.S. academic circles. The extent of the
Government's concern was evidenced by the emphasis placed on|
academic circles in the 1976 Plan for KCIA Operations in the
United States.

Making or encouraging grants to U.S. universities in support of;
Korean studies was the most conspicuous and costly measure un-
dertaken by Korea in its attempt to influence American academic
opinion. Grants tended to bring credit to a donor for encouraging
scholarship on Korea, long treated as an adjunct to the study of|
China and Japan. At the same time, the Government felt it might;
counterbalance or mute academic criticism. |

The role of the Government in the grant process was both direct' •
and indirect. It was direct in the cases of Western Michigan Uni-
versity and the University of Hawaii, which received their grants'
from the Ministry of Education. In the case of Harvard, a Blue'

"" The Korean Student Association is a social and cultural association of Korean students in
the Washington, D.C., area. Membership is voluntary, and its leaders are elected by its mem^
bers. For Kang Kyung Koo's testimony, see KI-5, pp. 111-114.

»• KI-5, p. 58.

297

House official tried to prescribe the use of the grant by asking that
it be confined to the study of the Korean economy. Seoul National
University, a Korean Government institution, apparently sought to
gain influence over the Korean studies program at Columbia by
trying to broaden the jurisdiction of the advisory committees at
each university to cover Columbia's entire program.

The only evidence of an actual KCIA attempt to make a grant to
a U.S. university was in the case of American University. Hancho
Kim, a Baltimore businessman who received large amounts of
money from the KCIA for influence activities in the Washington,
D.C., area, offered the university $300,000. The university refused
the offer because Kim insisted on a program focused on Korea
rather than on international studies in general.

The Government's role was indirect in those instances where the
Korean Traders Association was chosen by the Blue House and the
Ministry of Education to be the donor, as happened with Harvard
and Columbia. The donations were made by Korean businessmen,
using their own money, through the Korean Traders Scholarship
Foundation, a part of the Korean Traders Association. The subcom-
mittee found no evidence that the money for these grants was
provided by the KCIA or any other agency of the Korean Govern-
ment. The Korean Traders Association seemed to have had no
choice in the matter, however. Once designated by the Govern-
ment, it was compelled to make the donations.

The University of California at Berkeley also received its annual
grant from the Korean Traders Scholarship Foundation, but the
subcommittee found no evidence that the Government had specifi-
cally designated the Korean Traders Association to make that par-
ticular grant through the foundation.

Another example of the Korean Traders Association being or-
dered by the Government to make contributions to an academic
organization in the United States was noted by Kim Hyung Wook,
former director of the KCIA. Kim testified that the KCIA told the
Korean Traders Association to contribute to the Research Institute
on Korean Affairs, which formerly had been funded directly by the
KCIA.

The KTA evinced annoyance over the controversy surrounding
the grants. During the negotiations for the Columbia grant, P. J.
Koh of the KTSF was quoted by the New York Times as saying:

The Harvard experience was bad enough. But as a public institution we'll consid-
er the request if Columbia submits its application for help. Just remember that
from now on, we'll not allow Americans to slap our face for helping them with our
hard-earned money."'

The ROK Government made a number of efforts to achieve influ-
ence over Korean studies programs. This was particularly true
with Columbia, given the decision of the Minister of Education
against an endowment fund and in favor of broad jurisdiction for
the advisory committees.

Columbia saw to it that Seoul National University did not gain
influence over any part of its Korean studies program except the
joint program for the exchange of scholars. The jurisdiction of the
advisory committees and the annual reporting to which Columbia
agreed are limited to that program.

The New York Times, Dec. 16, 1976.

298

Harvard, the only university whose grant was in the form of an '
endowment, resisted efforts by the Korean Government to restrict
use bf its grant to the study of the Korean economy, a field in
which the Government's record was very successful. University
officials arrived at a compromise — a chair in Modern Korean Econ-
omy and Society.

At another occasion, the Korean Government, disturbed that a
professor at the University of Hawaii was seeking funds from ' '
North Korea, considered terminating the grant to that university.
It did not do so, however, and the subcommittee was not aware of
any actual attempt by the Korean Government to exert improper
influence on that institution.

The universities approached the prospect of Korean grants with
varying degrees of caution. All seemed fully cognizant of the poten- 1 1
tial danger to academic freedom attached to grants from foreign '
sources. The widespread, unfavorable publicity about the Korean |
Government that began around 1973 seemed to have been a turn-
ing point in the attitudes of American universities toward accept- j
ing money directly from that Government. For example. Harvard]
adopted a policy of not accepting grants from governments of divid- 1
ed nations in Asia, in part because of possible negative faculty and |
student reaction. ]

An official of the University of Washington asked that the Blue !
House or the Minister of Education help the university select a,
suitable professor to teach Korean studies. The president of the,
university found this to be a violation of university policy. The
university also wrote to the Korean Consulate General in San;
Francisco inquiring about a grant. The response came from the,
Korean Traders Scholarship Foundation, with whom talks then
began. The university declined an offer from the foundation, how-
ever.

Columbia indicated a willingness to accept a grant from either; i
the Korean Government or private sources. Columbia's efforts toi {
raise funds in Korean included approaches to President Park, \
Chung Hee and the Minister of Education, as well as private.;
sources. In the end, the money came from a private source. i

Only in the case of the University of California at Berkeley was
there apparently no discussion with Korean Government officials. ,
about proposed grants. i i

Some faculty and students at Columbia and Harvard were re-; 4
sentful that details were kept confidential. The subcommittee! ii
gained the impression that this secrecy gave rise to greater suspi-; i
cion as to the propriety of accepting money from Korean sources' }
during a time of widespread criticism of the ROK Government. \
This problem might be ameliorated if such politically sensitive i
negotiations were openly discussed among all interested members il
of the university community. • . \

The Korean Government itself was aware of the problems of! i
direct government grants. In the case of the Columbia grant, for' \
example, a letter from the Minister of Education to Columbia made 1
it clear that the KTSF was chosen by the Government to make the'
grant, as opposed to its making one directly, because the Govern-'
ment felt that the "current state of things in your country and the .
prevailing atmosphere among the faculty members at your univer-

[

299

sity" made that the wiser choice."* Since 1974, the ROK Govern-
ment appeared to have made all new grants through the Korean
(Traders Scholarship Foundation.

The subcommittee concluded that the Korean Government at-
tempted to use grants to influence American universities for politi-
cal purposes. It found no evidence that the universities accepted
grants with conditions limiting academic freedom. Nevertheless,
mere acceptance of Korean grants by American universities may
indicate a measure of success by the Korean Government in at-
tempting to improve its image in the United States. Donating
substantial sums of money to prestigious institutions lends the
donor a certain amount of recognition, and acceptance of the
grants could be taken to imply approval of the ROK Government.
Further, there is an inherent danger that the recipient may feel
constrained from criticizing the Government or allowing politically
sensitive topics or individuals to be involved in programs funded by
the grant.

The ROK Government also sought to use scholars, academic
conferences, and research institutes to influence U.S. public opin-
ion on Korea. This took the form of covert as well as overt funding,
offers of trips to Korea, and research funds for American scholars
and participation in academic conferences by scholars sympathetic
to the Government.

The KCIA played a large role in these efforts. It covertly sup-
plied large amounts of money to the Research Institute on Korean
Affairs, headed by retired Gen. Kang Young Hoon. Private individ-
uals and corporations in the Korean community were asked by the
KCIA and General Kang to participate in a laundering operation
designed to hide the KCIA funding. Activities of the institute in-
cluded sponsoring academic conferences and publishing an aca-
demic journal and scholarly works on Korea.

The ROK Government also covertly funded additional academic
conferences on Korea on at least two other occasions. According to
KCIA plans, such conferences were to be used to influence the
American academic community by presenting Korea in a favorable
light and drawing attention to its security concerns. On another
occasion, the KCIA attempted to influence an academic conference
by trying to secure participation by a pro-Government Korean-
American professor. In light of the political controversy and moral
questions surrounding ROK funding of academic conferences, the
subcommittee believes that the sponsors of such conferences, semi-
nars, and research institutions should advise their participants as
to the sources of funding, and that subsequent publications on the
proceedings should also identify sources of funding.

U.S. scholars, both those supporting and opposing the Korean
Government, were targeted by the KCIA as individuals to be invit-
ed to the ROK and influenced. The subcommittee found that such
attempts were in fact made in several instances. Further, the Gov-
ernment offered grants to individual scholars as part of its efforts
to influence the U.S. academic community.

The subcommittee concluded that Korean studies is an important
area of academic endeavor which has not received the attention it
merits and recognized that the relative neglect of the field has

••• See p. 277 of this report.

300

resulted in large part from the lack of financial resources. This
investigation has shown the problems inherent in attempting to
compensate for the lack of funds by accepting grants from the ROK
Government or private institutions in Korea.

The subcommittee recommends that the Foreign Agents Regis-
tration Section of the U.S. Department of Justice determine wheth-
er the Korean Traders Association (Seoul), the Korean Traders
Scholarship Foundation, and the Korean Traders Association, Inc.,
were acting as agents of the Korean Government in making grants
to U.S. institutions on its behalf; whether these organizations vio-
lated the Foreign Agents Registration Act; and whether these orga-
nizations should register now as agents for the Korean Govern-
ment.

Considering the example of the covert financing for the Research
Institute on Korean Affairs (RIKA) by the Korean Government, the ;
Subcommittee recommends that the foreign agents registration sec-
tion of the Department of Justice determine whether the activities
of such institutions are "only * * * in furtherance of bona fide
* * * scholastic, academic or scientific pursuits" or whether the
institutions should register as foreign agents under the provisions
of the Foreign Agents Registration Act.

If an educational or research institution is required to register as
a foreign agent under the Foreign Agents Registration Act, the
Internal Revenue Service should take that factor into account in
determining whether the institution is entitled to tax-exempt
status, under 26 U.S.C. 501(c)(3), which exempts from taxation any
"* * * foundation organized and operated exclusively for * * * edu-
cational purposes ♦ * ♦."

Because of the intrinsic value of studying Korean culture and
because of its importance to the understanding of Korea necessary to
the formulation of sound U.S. foreign policy in East Asia, the
subcommittee recommends that the Congress consider special pro-
visions for financial support of Korean studies in the United
States, perhaps by establishing a Korean-United States Friendship
Commission. There is a precedent for such a commission in the
Japan-United States Friendship Commission, established by the
U.S. Congress in November 1975 (Public Law 94-118).

INFORMATION

Efforts to influence news media

Historically, the ROK Government has been sensitive to criti-
cism in Korean and overseas media and has frequently used its
power to censor and influence both within Korea. It has also at-j |
tempted to control the Korean language press in the United States | >
and to influence the U.S. media in their coverage of Korea. j ^

Government control of the media within Korea

In the months immediately after World War II, which brought, 1
an end to Japanese suppression of the press, newspapers of every r
political inclination flourished in Korea. However, in 1946 the U.S.i tj
military government closed many newspapers it considered to left-; \\
wing. The Syngman Rhee regime continue to suppress those it| J
considered damaging to its interests. Following the student demon- 1 }

301

strations and resignation of Rhee in April 1960, all restrictions
were lifted, and there was another flurry of press activity. "»

Restrictions reappeared with the military coup in May 1961,^«°
but there was still a certain measure of press freedom throughout
the 1960's, as indicated by the existence of what were generally
considered to be ''opposition newspapers." Some articles criticizing
Park Chung Hee and his political party, the Democratic Republi-
can Party (DRP), were permitted as long as they were not too
extreme and did not question ROK Government policy toward the
DPRK.

With the establishment in 1972 of the Yushin constitution and
the rigid political controls that it inaugurated, tight censorship was
reimposed on the media in Korea; in many cases, a KCIA official
was assigned to newspaper, wire service, and broadcasting offices.

During a short period in late 1974 and early 1975, one prominent
Korean language daily, the Dong-A Ilbo, asserted its independence
and refused to submit to censorship. As a result, the Government
pressured the newspaper's regular advertisers to withdraw their
business, threatening the paper with financial ruin. In a spontane-
ous display of support for the paper, which was regarded as a
jymbol of Korean nationalism under Japanese colonial rule, the
3ublic kept the paper alive for 4 months by increasing its circula-
:ion substantially and, more importantly, by placing advertise-
nents. Many of these were very small, ana the majority were
Dlaced by individuals or groups who chose to remain anonymous,
rhe general theme was support for the principle of freedom of
expression and encouragement of the Dong-A Ilbo in its struggle
br that principle. During this period of harassment of the Dong-A
Ibo, the USIA continued to place advertisements in the newspaper.
n time, the pressure became too great, and the management suc-
cumbed to the Government's demands. Its commercial advertising
yas immediately restored.

Attempts to influence Korean media in the United States

Particularly after the establishment of the Yushin constitution
|n 1972, the Government attempted to extend its largely successful
control of domestic media to Korean communities in the United
states. For example, Kim Nam, the publisher of the Mijoo Dong-A,
I regular insert in the Dong-A Ilbo published in Los Angeles,
eceived warnings from the Seoul office of the Dong-A Ilbo foUow-
ng publication of certain articles. The Seoul office was responding
0 notices from the Ministry of Culture and Information that,
iccording to Korean law,^«* the Seoul office was to assume responsi-
)ility for the news content of the Mijoo Dong-A, even though it was
)ublished in the United States. In a letter of January 13, 1976,
^m Nam was threatened with recall if articles violating the Gov-
irnment's emergency measures were published in the future. ^^^

The KCIA tried to harass and intimidate publishers of other
Korean language newspapers in the United States whose editorial
)olicy was critical of the Korean Government. The Subcommittee

"•Henderson, Gregory, Korea, The Politics of the Vortex (Cambridge: Harvard University

ress, 1968), p. 180.

•-Ibid., pp. 183-84.

'"See appendix C-195.

'"See appendixes C-196, C-197, and C-198.

302

heard testimony from publishers of two such newspapers, Kim
Wooji Ha of the New Korea in Los Angeles, ^^^ and Song Sun-Keun
of the Korea Journal in San Francisco,^** both of whom said they
were the victims of KCIA harassment and intimidation in 1974-75.
There was further evidence that publishers of Korean community
newspapers in other parts of the United States and Canada were
subjected to similar KCIA treatment. ^^'^ Harassment took the form
of threats to their lives, pressure on advertisers, and attempts at|
slander through charges of Communist affiliation.

At times the KCIA also attempted covertly to establish and/or
fund both print and broadcast media which would present the{
Government and its policies in a favorable light. In the 1976 KCIA
plan, reference was made to the establishment of a ''black newspa-
per" ^®® in New York, directed at Korean residents. ^^^ The subcom-
mittee learned that a Korean-language newspaper, the Korea Post,!
was established in the spring of 1976 by Kim Chul at the suggesij
tion of Kim Hyung Sup, a KCIA operative posing as a journalist atJ
the United Nations. ^^® Kim Hyung Sup secured funding from the
Korean Exchange Bank in New York. He suggested to Kim Chu]
that the project had the approval of U.N. Ambassador Han Byung
Ki, who was in a position to be "helpful in the future." However
Kim Hyung Sup did not elaborate on what ''help" Han might|
provide.

Kim Chul was unaware that he was being used by the KCIA anc
printed three issues of the Korea Post in the early summer of 1976 1
However, he had a dispute with Kim Hyung Sup over an article irj
the third issue, published June 1, which criticized the lending
policies of the Korean Exchange Bank Kim Chul closed the newsj '
paper at that point rather than give up control over its content."'! i

The KCIA also attempted to discredit the anti-Park Chung He(j IB
movement in the United States by publicizing its internal disseni f
sion. One such incident in the spring of 1977 involved a New Yorli |ir
conference on repression in Korea. Although the sponsors of thti -^i
conference wanted to maintain an appearance of solidarity, th(| P
KCIA pressured one Korean-language newspaper to publicize the j«
fact that one participant, an American priest, left the conferenal f
because he found it too leftwing.i^<> This appeared to be an exampL* ||
of Korean Government attempts to weaken anti-Park forces. ^^^ i ^

'«=» SIO-l, pp. 16-33.

>«»♦ KI-5, pp. 86-90.

'«' Staff interview on Jan. 19, 1978 with Chung Kee Yong of the Han Min Shin Bo publishej
in Arlington, Va. According to Yang Yung Man, former Vice-Consul in the ROK consulate i]
Toronto, a KCIA official. Park Shin Chun, instructed him to "dissolve the local Korean newsp. ta
per, New Korea Times." Vice-Consul Yang was asked to pressure a financial supporter of thj |
newspaper to withdraw his support in order to drive it out of business. Rather than engage i; .
harassment of the Korean community, however, Yang resigned in March 1978 and sougl i
political asylum from the Canadian Government. (Based on steiff interviews, Yang's personij i^
statement, and other documents in the subcommittee's possession.) j • ,,

'•* In KCIA terminology, a "black newspaper" is one which is covertly funded and controUtJ 'z
by the KCIA. ■ J

'" KI-3, p. 135; see also appendix C-85. !

'•» Staff interview with Kim Chul on Feb. 27, 1978. In a staff interview with former KCI C
official Sohn Ho Young on Sept. 21, 1977, Sohn identified Kim Hyung Sup as a KCIA operativ

«•• Ibid.

"° Staff interview with Michael Mclntyre and Rev. Kim Sang Ho on June 17, 1977. ^ ^

»" The 1976 KCIA plan explicitly stated that the KCIA inteneded to disrupt anti-ROK Cover
ment Korean resident groups in the United States. See KI-3, pp. 116-119; see also append
C-85.

303

Other KCIA efforts to control Korean-langauge media were con-
lucted by Hahn Kwang Neun in Washington, D.C., who, according
■jO a declassified summary of U.S. Government reports, was one of
several Korean residents recalled to Seoul in late 1972 to be briefed
)n possible activities to influence U.S. opinion on the Yushin
system. ^^2 k^j^ Sang Keun testified that Hahn had received fman-
;ial support for the publication of a Korean-language newspaper
called the Hankook Shinmoon, according to a "Plan to Properly
juide Korean Residents." This plan was drawn up at the Embassy
n Washington in 1973 by Ambassador Kim Dong Jo and KCIA
itation chief Lee Sang Ho and approved in Seoul by the Foreign
Ministry.*" The newspaper was to counter the unfavorable influ-
ence of two anti-Government papers being published in the Wash-
ngton area, the Free Republic, put out by Chang Sung Nam, and
he Hanmin Shinbo of Chung Kee Yong. Hahn's paper was to be
^ven a subsidy of $3,000 a month for 1 year in the expectation that
t would then be self-sustaining. The ultimate objective was for the
)aper to grow into a nationwide pro-Government publication."*

Hahn was not able to make the paper self-sufflcent within a
^ear, and the subsidy was continued. Although the plan was offi-
;ially the Foreign Ministry's, Kim Sang Keun testified that after
-<ee Sang Ho returned to Seoul at the end of 1973 under pressure
rom the U.S. Government,*" Lee sent the money through the
liplomatic pouch to Kim for delivery. Kim could not recall the
otal sum, but he conveyed money from Lee to Haihn on six or
even occasions. In September 1974, he received $56,000 from Lee
or Hahn, the largest single sum Kim transmitted to Hahn. KCIA
:hannels were used to transmit the money instead of Foreign Min-
stry channels because use of Foreign Ministry channels would
lave brought the transactions to the attention of more people."*

Hahn and the Hankook Shinmoon were specifically mentioned in
he section of the 1976 KCIA plan calling for the use of media of
Korean residents."^ The same section of the plan also called for
manipulating the Washington Observer, an English-language publi-
t^ation of Hahn's by getting it to hire an American reporter whom
X would then influence. In 1976, Hahn did hire an American
eporter on a trial basis for several months beginning in July or
\.ugust, but he did not work out."*

Hahn departed for Korea on 1 day's notice in November 1976,
hortly after the Tongsun Park scandal broke in the U.S. press,
ind the subcommittee was unable to question him about his activ-
ties."« He has not yet returned, even though his family still lives
lere.

Lee Kwang Jae, another Washington area, Korean-language
nedia figure, was also used by the ROK Government. Lee had
)ecome involved in several Korean-language TV and radio broad-

'^See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," pp.
'44-146.

•"KI-5, pp. 64-65.

"♦KI-5, pp. 64-65; staff interview with Kim Sang Keun.

'"Former Ambassador Richard Sneider testified before the subcommittee that the State
)epartment pressured the ROK Government to recall Lee Sang Ho and that he was withdrawn
s a result of this pressure in January of 1974. See KI-5, pp. 46-48.

'^•KI-5, p. 65.

'"KI-3, p. 129; see also appendix C-85.

"•Interview with Kim Tong Hyon on Nov. 15, 1977.

"• Ibid.

304

casting ventures in the Washington area since 1973, after he fin
ished a 2-year contract with the Voice of America that had broughi
him to this country. *®° Lee Kwang Jae and his "Washingtor
Korean TV" were listed in the section of the 1976 KCIA plai
calling for use of Korean residents' media."* In an interview witl
subcommittee staff, Lee insisted that he never received any suppor
from the Korean Government for any activities. "=* However, Kin
Sang Keun stated that Lee received small sums of money fron
Foreign Ministry sources on an irregular basis as part of the "Plaij;
To Properly Guide Korean Residents." Furthermore, a former high|
ranking official at the Korean Embassy informed the subcommitte*
staff that in late 1973 or early 1974, he personally received $20,00»j
through the diplomatic pouch. Shortly thereafter, Han Nam Sukj
I)irector of the Overseas Affairs Bureau of the Ministry of Cultur;
and Information, asked for the money to give to Lee to support hi|
broadcasting activities. When the official objected to pajdng th
money to Lee, Han told him that Lee had connections in the Blu«
House and that the decision had been made there. The official thej
took his objections to Ambassador Hahm Pyong Choon, who re
fused to take any responsibility but acquiesced when the officia
suggested that monthly pa3niients would be the best way to insuri
the money was used to support broadcasting. Lee then receiver
monthly pajonents of $1,500 each."^

From October 6, 1974 to November 30, 1974, Lee's Korean BroacJ
casting. Inc., provided a program called "Korean Hour" which wa,
aired by WETA, a Public Broadcasting System television station ij
the Washington area. The programing was handled by the Goverr
ment-owned Korean Broadcasting System (KBS) for which Lee ha
worked for about 20 years. Although the content was to be cultura
and not political, WETA soon discovered that each program cor
tained 10 minutes of news. For a variety of reasons — which incluci
ed WETA's inability to control a Korean language program thai
could not understand, the ''legal and ethical problems' posed bj
"programs made in a foreign language by a foreign government,
and the financial problems caused by the complexities of airini
this particular program — WETA decided to discontinue it.*«*

According to Fred Flaxman of WETA, when Lee was informel
there were financial obstacles to continuing the program, he cam!
to Flaxman's office with a check for $7,800. By this time, howeve?j
the decision was final.**' I

Lee denied producing the check but allowed that he might havl
promised to raise the money in his eagerness to convince Flaxmai
to continue the program.

On July 2, 1975, Lee received two checks totaling $20,000 froi
the Little Angels account of the Korean Cultural and Freedoii
Foundation. *«« According to the books of the KCFF, these chech

'*" See p. 306 of this section of the report.

'" KI-3, p. 129; see also appendix C-85.

'" Interview with Lee Kwang Jae on Jan. 12, 1978

•" Confidential staff interview of Aug. 14, 1978.

"»« Letter dated Jan. 15, 1975 from Fred Flaxman to Lee Kwang Jae.

>" Staff interview with Fred Flaxman on Dec. 7, 1977.

'"See p. 338 of this section of the report.

305

-epresented repayment of a loan made by Lee to the KCFF in
tiorea. Subcommittee staff questioned Lee about these checks be-
cause they suggested that Lee's broadcasting activities were being
\inded by the KCFF or even by the ROK Government through the
XCFF. According to Lee, in 1975 he sold some land in Korea, but
lad no legal way to take the money out of the country. At that
X)int, he read about a groundbreaking ceremony for the Little
\ngels School. Lee knew Pak Bo Hi vaguely as a prominent man
n Washington and asked him if he would accept $20,000 in Korean
noney for use in connection with the school, to be repaid later in
ioUars. Although they were not well acquainted, Pak readily did
lim this favor, even though it was a clear violation of the Korean
breign exchange law. Lee stated that he then used the money to
)urchase a house in the Washington area. He was completely
mable to explain why he received the money in two checks on the
;ame account on the same day drawn by the same person instead
)f receiving one check. He also could not explain why he had
endorsed one of the checks over to Judith LeJeune, the KCFF
)fficial who had made out the checks.^*'

EFFORTS TO INFLUENCE U.S. MEDIA

The ROK effort to influence U.S. news reporting on Korea was
nultifaceted. It included intimidation and expulsion of U.S. corre-
spondents from Korea, offers to journalists of expense-paid trips to
(orea, editing or outright censorship of Voice of America broad-
asts and U.S. news publications available in Korea, and an offer of
noney to a high-ranking VOA official by a Blue House presidential
idviser.

'/oice of America

In the late 1960's, U.S. news on Korea was broadcast into the
lOK through Korean-language programs of the Voice of America
rom transmitters in Okinawa. These broadcasts, produced at VOA
acilities in Washington, D.C. by its Korean Service, were also
elayed live over the Government-owned Korean Broadcasting
system (KBS) and over several commercial stations in Korea. Tliis
enabled VOA to increase considerably its listenership in the
lOK.i««

The subcommittee was told that in late 1969 and early 1970,
Jnited States Information Service (USIS) officials in Seoul became
;oncerned that news broadcasts relating to Korea were being al-
ered. Both the political affairs and press officers at the U.S. Em-
)assy in Seoul at that time speculated that the news broadcasts
vere being changed either during trainslation of the news script
rom English to Korean or during the announcement of the
iews.^»» The officials' concern was expressed in classified letters
ind cables to the U.S. Information Agency's (USIA) Office of Secu-

Interview with Lee Kwang Jae on Jan. 12, 1978.
Interviews with VOA officials, both former and current.
Interview with Clyde Hess on July 27, 1978.

306

rity in Washington, D.C., in January and February 1970.i»<> One
letter, dated January 27, stated:

* * * we suspect * * * they [VOA translators] are changing the thrust of items oi
Korea to conform to ROKG pohcies. We feel that on occasion they may be adding U
the copy * * * or sometimes softening or hardening the English terms as the resul
of ROK embassy 'guidance.' "'

One example cited by the officials was that of substituting th(
phrase "excess combat activity" for the word ''atrocities" in a stor
on ROK troops in Vietnam. ^^^ Despite these concerns, an in-hous<
VOA investigation in April 1970 exonerated the Korean Service a
any improprieties.^®^

Later that month, on April 28, USIA received the first of a series
of cables indicating that the Korean Government viewed KBS staf
members working at VOA in Washington to be under its direction
It also noted that the ROK Government was pressuring VOA t<
use one KBS announcer, Lee Kwang Jae, as the sole announcer or
all television programs produced by USIA for Korean television
Further, Lee had asked Chung II Kwon, the Korean Prime Minis
ter, to intercede on his behalf to insure this position at VOA rathei^
than that of another staff member.*** ■

Involvement of the Prime Minister was felt by the USIS official!
to be a "delicate matter." An April 28 cable noted their concenTi

This is extremely delicate matter. Involvement of PM's office now makes it eve)
more so. However, fact that ROKG pushed so long and so hard to obtain appoint
ment for Lee Kwang Jae plus fact that VOA listenership here extremely marginal
suggests to us that ROKG may not see Lee as VOA employee only or VOA job ma;
provide cover."'* |

Despite this concern, VOA eventually hired Lee.

In late May, the ROK Government again attempted to pressuri
USIA to use only Lee Kwang Jae on its television programs and or
VOA news broadcasts prepared by the Korean Service. The re
quest, made by the Minister of Culture and Information througl
Lee Jai Hyon, chief cultural and information attache at the Embas
sy in Washington, went to Frank Shakespeare, Director of USIA
He rejected the request in a return letter dated June 9, 1970.*»

A high-ranking USIA official looking into the matter decidecj
that it was too sensitive for USIA to handle and concluded, in i
memo dated May 4,

that if the same set of circumstances occurred in an Iron Curtain country he wouL
have no hesitancy at all in recommending a full lOS [Internal Office of Security a^
USIA] investigation, but to the contrary it has occurred with an ally and on a higlj i

^^ Documents viewed by subcommittee staff on July 26, 1978.

>»' Letter from Political Affairs Officer Daniel Moore to Daniel Oleksiw, Assistant Directc
(USIA) East Asian and Pacific. See appendix C-199.

•" This example and others were cited in an internal Office of Security memos dated Feb. L-
and Mar. 19, see appendixes C-200 and C-201.

'" In-house investigation determined that cases were isolated and not part of a conspirac;
This investigation consisted of an examination of the English-language translations of ti
Korean-language VOA broadcasts in Seoul. These translations were then compared with th
original English-language transcripts. The recordings of the Korean-language broadcasts wei
not listened to for fear that the Korean staff members at VOA would know they were undt
investigation. See appendixes C-200, C-201.

'" See appendix C-202.

'»* See appendix C-202. I

'»« Frank Shakespeare's letter to Lee Jai Hyon is printed in appendix C-203. J

307

governmental level and therefore should be handled administratively and circum-
spectly if at all possible. ^»'

Despite allegations from USIS officials in Korea of alterations of
VOA broadcasts to Korea and concern that Lee might be using his
job at VOA as a ROK Government "cover," no full investigation
was ever undertaken, nor was a report sent to any other executive
branch agency. ^^®

Several months later, on October 20, 1970, Han Gi Uk, an advis-
er to Park Chung Hee in the Blue House, approached a high-
ranking official in the Far East and Pacific Division of VOA, a
division which included, among other units, the Korean Service. ^»»
: This official, who had served earlier in the U.S. Embassy in
! Seoul, told the subcommittee that he interpreted Han's offer as an
attempt to bribe him to make VOA news content favorable to the
Korean Government. 2«>o He reported the incident to the USIA
Office of Security which notifjad FBI Director J. Edgar Hoover in a
letter dated November 3, 19 70. This letter stated that Han said
Minister Yoon Seung Kook, KCIA station chief at the ROK Embas-
sy in Washington, "had lots of money to spend" and could help the
official if he wan ted. ^^^ There was no FBI response to this letter at
USIA indicating whether or not the Bureau looked into the matter.
According to former and present employees of VOA, the ROK
Government was extremely sensitive to VOA news broadcasts criti-
cal of the Government or Park Chung Hee's domestic policies.****
On occasion, KBS threatened to and did cut off its relays of live
broadcasts of VOA programs when they contained such news sto-
; ries. USIA documents revealed that one such incident occurred at

I the time of the 1971 Korean elections. Further, following VOA
, reporting of criticism of the Yushin constitution within the United
: ' States in the fall of 1972, the KBS initiated a policy of taping and
censoring VOA broadcasts before airing them on KBS. Finally, in
1973, after VOA reported the kidnaping of Kim Dae Jung, KBS
ceased broadcasting VOA programs altogether and pressured all
private radio stations to do the same.*°^ Because of this decision, as
of 1978, VOA programs— for broadcast to both the DPRK and
ROK — can only be received via a weak, shortwave signal from the
Philippines.**^

As part of the ROK Government's efforts to control media re-
porting on Korea, in March 1975 it amended the criminal code to
make it a crime punishable by up to 7 years imprisonment for a
Korean citizen to say anything which might harm the welfare of or
defame the ROK while abroad or to a foreigner. VOA officials

'»' Internal Office of security memorandum, dated May 4, 1970, from Brian C. Bowling to Paul
D. Mason.

'•• No investigation of this was undertaken despite speculation in a memorandum dated Feb.
26, 1970, that Lee might be an "inside man for the ROK CIA." See appendix C-200.

'•• Han Gi Uk was in the United States at the time to negotiate with Encyclopaedia Britan-
nica to publish a laudatory book about President Park Chung Hee, to be ghostwritten by Han.
(Staff interview with a former official at VOA.) Col. Pak Bo Hi, principle aide to Sun Myung
Moon, testified before the subcommittee that arrangements for this book were coordinated with
the Korean Cultural and Freedom Foundation. See KI-4, pp. 463-465.

**° Staff interview with a former VOA official.

*" A sanitized version of this letter is printed in appendix C-204.

**** Staff interviews with former and present VOA officials.

**« Staff interviews with former and present VOA officials. See also exchange of letters
between James Keogh, Director, USIA and Congressman Donald Fraser, printed in "Human

Rights in South Korea , reprinted in appendix C-205. See also letter from General

Counsel of ICA dated Oct. 27, 1578, appendix C-206.

•** Staff interviews with VOA officials.

35-508 O - 78 - 21

308 I

feared that Korean citizens on the staff of its Korean Service might
be called upon to broadcast a VOA news story which would put
them in violation of the law. As a result, VOA adopted a policy of
using only U.S. citizens for news broadcasts relating to Korea and
stories critical of the Government.*®'

Foreign press censorship and harassment in Korea

Although there had been some censorship of foreign news enter-
ing the ROK for a number of years, it had usually involved the
distortion of statements by U.S. Government officials to assure the
Korean people that the positions of the Korean and American
Governments were not contradictory. A State Department cable
dated May 19, 1961, 4 days following the military coup, cited an
example "typical of [the] distortion of USG's position which [is]
being spewed through Korean press." It was an article that report-
ed incorrectly that the U.S. Government welcomed the resignation
of Chang Myon and was prepared to recognize the military govern-
ment.2o«

Korean media published extensively U.S. media accounts favora-
ble to the Government. The U.S. Government was aware of onei
example of this which occurred at the time of the promulgation of (i
the Yushin constitution in October 1972. The Korean media distort-(i
ed and then publicized broadly statements by U.S. Congressmen to|
demonstrate U.S. Government approval of the constitution. [

Similarly, it was common for the Government-controlled press to
cite favorable editorials written by private individuals, or eveniAsi
letters to editors in the U.S. print media, as being the position ofl w
the U.S. newspaper, thus giving the appearance of U.S. media i
support for Korean Government policies.

Since the implementation of the Yushin constitution, the nature
of censorship over foreign press reporting in Korea changed both >v
quantitatively and qualitatively. The subcommittee saw instancesl di
where individual sentences and even entire pages of material criti-l
cal of the Government were removed from the United States and
Japanese weekly news magazines. Issues in libraries of U.S. mili-
tary installations containing critical stories had to be locked up lesl
they be stolen or censored.***^

This censorship appeared to have abated somewhat in mid- 1977
The subcommittee received reports that U.S. news magazines werc|fj
no longer being edited by Korean censors.*®*

A survey of U.S. correspondents working in Korea, done for the
subcommittee by the Congressional Research Service, revealec
clearly that they were hampered by the Korean Government in thdlj
course of news-gathering in Korea. Persons with whom thejji |.-
wanted to speak were harassed and intimidated. Some correspon j ) L
dents were denied ROK Government assistance while reporting ir^
Korea. A prominent correspondent interviewed by the subcommit
tee staff corroborated this information.*®*

*•* Staff interviews with VOA officials.
""•This cable appears in appendix C-3.
*°^ Confidential staff interview.
** Ambassador Richard Sneider testified before the subcommittee about this media censor
See KI-5, pp. 37-38.
** Staff interview with Richard Halloran, correspondent with the New York Times.

309

r At the same time that the ROK Government sought to intimi-
date those correspondents it considered to be anti-Park Chung Hee,
it invited other correspondents and broadcasters to visit the ROK*
paying all their expenses. The larger U.S. newspapers, however,'
have a general policy of not accepting trips from foreign govern-
ments.

The emergency measures of 1974"° were designed in part to
hamper foreign media from reporting objective stories from Korea.
The Ministry of Culture and Information announced in January of
that year that the measures, which prohibited reporting on acts
which violated them, would apply to foreign correspondents as well

, as Korean citizens.

[ In the spring, the Government reportedly intensified its efforts to

t control foreign media in Korea. It drafted a ''blacklist" of undesira-
ble foreigners, principally correspondents, who were to be denied
new visas; the visas of others were to be canceled. Still others
would be allowed into the ROK but would be watched carefully.^"
A week after the list was compiled, the visa of one U.S. corre-
spondent, Elizabeth Pond of the Christian Science Monitor, was
canceled. Due to publicity in the Japanese media over the list in
the fall of 1974, no other visas were affected until February 1978,
^hen John Saar, an Austrian citizen writing for the Washington
Post, was denied one.

The subcommittee learned from a former high-ranking Korean
consular official that the blacklist was also maintained by Japa-
lese consulates in the United States at the request of the Korean
jovernment.*^^ According to this official, whenever a person on the
ist applied for a Japanese visa, consular officials consulted with
;he Japanese Foreign Ministry in Tokyo, which in turn asked the
Korean Embassy there for approval to issue the visa. The Korean
Jovernment made this request in order to control the activities of
pdividuals believed to be associated with anti-Government Korean
proups in Japan.

j The subcommittee questioned the U.S. State Department about
Jtas matter and received the following reply:

1 It is not unusual for visa-granting and immigration authorities of countries to

Ioaintain lists of persons they deem may be ineligible or require special screening
or entry into their countries under the law. Nor is it unusual for immigration
'uthorities of various countries to share such information with other countries
-'- .'here appropriate. The United States maintains such a visa lookout list, and where
ppropriate, shares information with other countries.'"

In 1975, other laws were enacted in the ROK which hampered
Dreign correspondents. As noted earlier, in March the criminal
ode was amended to make it a crime punishable by up to 7 years
mprisonment for a Korean citizen to say anything which might
larm the welfare of or defame the ROK while abroad or to any
Dreigner in Korea. Emergency Measure No. 9, decreed in May,
lade it an offense punishable by a minimum of 1 year in prison to

"•See "Part B: Review of Korean-American Relations," p. 40.

"'This list appears in Stu Cohen and Jeffrey Stein, " The South Korean Papers," The Boston

hoenix (Oct. 11, 1977) pp. 20-22. Kim Sang Keun testified that he had seen a similar list at the

OK Embassy in Washington which was sent from KCIA headquarters in Seoul. KI-5, pp.

i-«9.

•"Confidential staff interview.

"•Contained in a letter dated June 8, 1978 from the Department of State to Congressman

3nald Eraser.

f
i

310

oppose or criticize the Yushin constitution.^^* Because most U.S.
news organizations relied on stringers who were Korean citizens,
these repressive measures seriously hampered news gathering. |

Other attempts to influence U.S. media \

During 1975 and 1976 the ROK Government and KCIA planned'
to step up public relations efforts aimed at the U.S. media. Activi-j
ties in the United States were to be put under the control of Hanj
Byung Ki, Korean Ambassador to the United Nations and son-in-|
law of President Park Chung Hee.*" One former high-ranking I
ROK consular officer told the subcommittee that Han directed!
consular officials to contact representatives of the U.S. media and'
offer them trips to Korea, all expenses paid.*** The 1976 KCIA plan
also recommended influencing U.S. media personnel, both broad-
cast and print, particularly by offering invitations to the ROK."'

The subcommittee learned that such offers were made to corre-
spondents at the Christian Science Monitor, Philadelphia Enquirer,|^
and Chicago Daily News.*" The subcommittee talked with each
individual targeted in the 1976 plan and learned that each, in fact,
had received an offer. In the case of one columnist, the invitation
was accepted. He met with high-level officials in Seoul, including
President Park Chung Hee, and received briefings on the current
political and military situation in Korea.**® The subcommittee was' f
aware that other U.S. media personnel had also been offered andi
had accepted trips. ^

The subcommittee does not intend to imply that any correspon-
dent was improperly influenced. It is of the opinion, however, thai
acceptance of Government-sponsored trips to South Korea makes 11
difficult to maintain the t)rpe of relationship required for objecti
reporting.

The subcommittee also learned that attempts were made to use
U.S. media for political purposes. Sometime between 1970 and 1972
according to a noted East Asian specialist at Harvard University!
he was visited by Dr. Joungwon A. Kim, an acquaintance anc ju]
Harvard law student. After praising the professor^s grasp of Eas'j
Asian affairs and noting that it would be a good thing if Time O]
Newsweek were to do a cover story on President Park, Kim said hi
was sure the professor could arrange for such a story. Surprised
the professor said it was impossible. Kim repeated that he was sur<
the professor could do it and that the ROK Government would ht
grateful. After the professor refused again, Kim said that friendl^j ,.
sources in the Government would express their gratitude by givini. t
him $50,000. The professor expressed astonishment, and the conver! t
sation was terminated.**" When questioned about this matter. Kin;
denied any connection with this incident and stated that the Hai
vard professor must have confused him with someone else.*** -

I Iw

»*♦ See "Part B: Review of Korean-American Relations," p. 40.

»" See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," p. 15!
"• Confidential staff interview.
*" KI-3, p. 129; see also appendix C-85.
*" Staff interviews with officials at these newspapers.
**• Confidential staff interview.

"*• Confidential staff interview. This incident was later described in a New York Times artic)
of Dec. 16, 1976.
"* Staff interview with Joungwon A. Kim on Jan. 16, 1978.

311

^; The 1976 plan proposed the use of anti-Communist groups such
as the Freedom Leadership Foundation^ and Accuracy in Media
(AIM) to discredit organizations and individuals felt to be "pro-
North" in the Korean-American community."3 An early example
of this occurred in 1971. Freedom Leadership Foundation used its
publication, The Rising Tide, to discredit a Korean-American schol-
ar in the same manner as proposed in the Plan. The article in The
Rising Tide specifically referred to the scholar as "pro-communist"
and suggested that he was a danger to U.S. security."*

CONCLUSION

During the past decade, the ROK Government concerned about
its image in the mass media at home and abroad, took various
measures to improve that image. Within Korea, these measures
took the forms of tight censorship of the ROK print and broadcast
media, at times by placing a KCIA official in their offices. Further,
since the early 1970's the Government tightly restricted access to
["oreign news sources by Korean citizens and made it more difficult
J'or Koreans to receive Voice of American Korean-language broad-
casts. In addition, it censored passages from foreign publications.

In order to improve its image abroad, the Government sought to
ngratiate itself with foreign correspondents by KCIA offers of all
expense paid trips to Korea. At the same time, it denied entry to
)thers believed to oppose it and hindered news gathering of still
)thers already in Korea.

Efforts to improve the image of the Government internationally
ncluded enactment of harsh laws in Korea designed in part to
imit contact between foreign correspondents and Korean citizens.
)ne 1975 law carried a maximum 7-year prison sentence for Kore-
ins who criticized the Government to foreigners or foreign organi-
ations.

Within the United States-Korean community, the ROK and
^CIA established and funded newspapers and radio and television
)roadcasts to give favorable commentaries. Publishers of critical
lewspapers were blatantly harassed and intimidated by the KCIA
n cities across the country.

THE MOON ORGANIZATION
Introduction

During its 1976 investigation of KCIA activities in the United
states, the subcommittee received numerous allegations concem-
ng Sun Myung Moon ^^^ and organizations associated with him. By
hat time. Moon and the Unification Church (UC) had generated
ontroversy throughout the United States over a variety of issues.
• vlany Americans were distressed by the recruitment techniques of
he UC. Others questioned the failure of the UC to state openly its
ies -with the numerous groups it had set up; the use to which it

»»The Freedom Leadership Foundation (FLF) is discussed in "The Moon Organization see-
on, pp. 319-320; 343-346.

«»KI-3, p. 118; see also appendix C-85. The names of FLF and AIM were deleted from the
riginal published version of the 1976 KCIA plan.
I *** Confidential staff interview.

"* Although Sun Myung Moon's followers refer to him as "Reverend, the subcommittee has
0 information as to whether he was ever formally ordained.

312

put its tax-exempt status; the propriety of its owning and operating
an armaments plant in South Korea; possible links to the South
Korean Government; and Moon's statements in late 1973 and 1974
concerning President Nixon and Watergate. The most volatile con-
troversy raged around the charges that "Moonies" were brain-
washed. The UC in turn countercharged that parents were kidnap-
ing UC members for "deprogramming" and successfully obtained
court orders restricting the activities of the deprogrammers.

Among the witnesses who testified before the subcommittee in
1976 was Lee Jai Hyon, a former official of the ROK Government
who had been stationed at the Korean Embassv in Washington."*
Lee described what appeared to him to be ' a curious working
relationship" ^^^ involving the Korean Government, the UC, and
other organizations associated with Moon. Lee said that Pak Bo Hi,
Moon's aide and translator and president of the Washington-based
Korean Cultural and Freedom Foundation (KCFF), had access to
the Korean Embassy's cable channel to Seoul; that KCIA agents at
the Embassy maintained contact with the Freedom Leadership
Foundation (FLF), another Moon-related organization in Washing-
ton; that Moon had founded the ''Little Angels," a Korean chil-
dren's dance troupe which had appeared around the world as offi-
cial representative of the Korean Government; that South Korean
President Park Chung Hee had mailed out 60,000 letters on behalf
of the KCFF; and that Moon operated an anti-Communist indoctri-
nation center in Korea for Korean Government employees and
military officers. Lee also pointed to Moon's rise to wealth and
prominence under the Park regime and suggested that this could
only have occurred with the active cooperation of the KCIA and
other branches of the Government.

Alan Tate Wood, a former UC member who had been president
of the FLF, described to the subcommittee some of Moon's politicaJ
ambitions and activities. He said that Moon, through the UC and
its numerous front organizations, wanted to acquire enough influ-
ence in America to be able to "dictate policy on major issues, tc
influence legislation, and move into electoral politics." ^^^ In the
United States, the political goals of the UC and those of the KCIA
"overlap so thoroughly as to display no difference at all." ^^^ Wooc
also charged that Moon was violating U.S. laws by importing aliem
to raise funds and that fundraising by UC members was often done,
under false pretenses.

Another witness, Robert Roland, ^^^ described his friendship wit!
Pak Bo Hi when Pak was a military attache at the Korean Embas, -
sv in Washington in the early 1960's. According to Roland, Pak wasjJ
then eng£iged in intelligence liaison work and was also proselytiz^^
ing for Moon and the UC. Pak told Roland of his plans to use th(
KCFF and one of its projects, the Little Angels, to advance Moon'j-
cause, as well as to help the Korean Government. ^^^

The subcommittee heard a former UC member, Chris Elkins
describe political activities in which he had engaged for the FLF

*«• Lee's testimony is also discussed on pp. 96-97 of this report.
*^ SIO-II, p. 9.
«• SIO-II, p. 21.
?«SIO-II, p. 21.

*" SIO-II, pp. 14-20. Roland, a former airline pilot, was one of the original members of th j
board of directors of the KCFF.
«' SIO-II, p. 30.

313

[Tiese included working on a congressional election campaign, lob-
bying for South Korean military aid bills, and staging demonstra-
ions. Elkins said that many of Moon's activities in the United
;tates were designed to impress the Korean Government with his

: mportance. *^*

During 1976, the subcommittee also received information about
n apparent attempt by Moon and his followers — along with Tong-
un Park— to buy a controlling interest in the Diplomat National
Jank (DNB), which opened in Washington D.C., in December 1975.
Jeil Salonen, president of the UC of America, was called to testify
oncerning this and other allegations. Salonen said he had bought

: )NB stock at the suggestion of Pak Bo Hi, but denied the UC was
1 any way involved in financing the DNB stock purchases. ^^^

Use of the term ''Moon Organization"

:] By April 1977, when the Investigation of Korean-American Rela-
j|ions began, although the subcommittee had received a wide vari-
7 ty of specific allegations concerning Moon and the organizations

- ssociated with him, the subcommittee had little understanding of
le scope and nature of his movement. It soon became apparent
lat he was the key figure in an international network of organiza-
ons engaged in economic and political as well as religious activi-
es. The numerous churches, businesses, committees, foundations,
nd other groups associated with Sun Myung Moon emerged as
arts of what is essentially one worldwide organization, under the
mtralized direction and control of Moon. This organization began
^ a small movement started by Moon in Korea in 1954. In the

, varsity of its functions and basic organizational structure it now

! jsembles a multinational corporation, involved in manufacturing,

iternational trade, defense contracting, finance, and other busi-

- ess activities. However, it goes beyond that in that it encompasses
iligious, educational, cultural, ideological, and political enterprises
5 well. In the training and use of lower ranking members, it
isembles a paramilitary organization, while in other respects it
as the characteristics of a tightly disciplined international politi-
il party.

Among the many organizations there is continuous and close
• iteraction, principally in the form of personnel moving back and

•rth among organizations, intermixed finances, use of one compo-
* ' 3nt or another component as if both were one and the same, and,

' course, the figure of Moon. Because of the close interrelationship
the various organizations, the subcommittee came to view them

> one unit and refers to them in the aggregate as the Moon

rganization in this report.

Goals of Moon

Before reviewing the components and activities of the Moon Or-
inization, it is useful to look at various writings and speeches of
con in which he discusses the goals of his movement and the

'^'SIO-II, p. 49.

"•' Testimony of Neil Salonen, executive session hearings before the Subcommittee on Interna-

nal Organizations, Sept. 30, 1976.

314

means required to achieve them. Within that context, the Mooi
Organization becomes more comprehensible.

In many public statements and in applications for tax-exem]
status, the goals of the Moon movement are said to be religioi
Actions which appeared to be clearly political or economic to oul
siders were explained as necessary means to achieve religioi
goals. The apparent contradictions in many of the activities of the
Moon Organization are explained by Moon's overriding religioi
goal — to establish a worldwide "theocracy," that is, a world orde]|
which would abolish separation of church and state and be go^
erned by the immediate direction of God. As Moon explained to
followers:

* * * In the Medieval Ages, they had to separate from the cities — statesmansl
from the religious field — because people were corrupted at that time. But when
comes to our age, we must have an automatic theocracy to rule the world. So,
cannot separate the political field from the religious.

* * * Separation between religion and politics is what Satan likes most. (Italic
added.) "*

At the center of such a state would be Moon and his organi:
tion, bailed in Korea. In another speech, delivered to a crowd o|
over a million at an anti-Communist rally in Korea, Moon visuj
ized the establishment of a "unified civilization" of the whoU
world, to be centered in Korea and "corresponding to that of thi
Roman Empire." "»

Moon teaches American UC members to regard Korea with grea
reverence and he foresees the day when the Korean language wil
be spoken throughout the world:

In order to set up one culture, we must unify the languages into one * * * In th
ideal world centered upon Grod, everyone will speak only Korean, so no interprete
will be necessary. "*

Moon promises to use his trained followers from around th<
world on behalf of South Korea in case of war, as he proclaimed a
a public rally near Seoul:

* * • in case North Korea provokes a war against the South Korean people, the
[UC members] believe it is God's will to protect their religious fatherland to the lasi
to organize the Unification Crusade Army, and to take part in the war as
supporting force to defend both Korea and the free World. ''^

Anti-communism is one key reason for Moon's espousal of ;,
worldwide theocracy and rejection of some of the most fundameri
tal tenets of American democracy. Moon finds "American-styl
democracy" to be "a good nursery for the growth of Commi
nism."23* In a speech in Seoul, Moon proclaimed that God wa
helping to set up a final battle involving the United States, Russia
China, North Korea, South Korea, and Japan. Illustrative of th
stridency of his ideology, he said: "We should defeat Kim II Sun
[President of North Korea], smash Mao Tse-tung, and crush th
Soviet Union in the name of God." ^^^

"« Master Speaks, May 17, 1973, p. 12. The Master Speaks is an internal publication of tl
Unification Church, containing verbatim translations of numerous speeches by Moon, see appe: :
dix C-212.

"» Master Speaks, June 7, 1975, p. 6, see appendix C-226.

"• Master Speaks, Nov. 17, 1974, p. 6, see appendix C-223.

»" Master Speaks, June 7, 1975, p. 6; see appendix C-226. j

"• New Hope News, Mar. 10, 1975, p. 7. The New Hope News is an internal publication of tl)
Unification Church; see appendix C-243. i

"• Master Speaks, June 7, 1975, p. 5; appendix C-226.

pi 315

To achieve his theocracy, Moon has mapped out strategies for
gaining control and influence over economic, political, cultural,
academic, media, and religious institutions. The efforts of the Moon
Organization are to be concentrated on key nations.

If we can manipulate seven nations at least, then we can get hold of the whole
world: the United States, England, France, Germany, Soviet Russia, and maybe

- Korea and Japan. On God's side, Korea, Japan, America, England, France, Ger-
many, and Italy, are the nations I count on in order to gain the whole world.**®

Moon's strategy is designed to influence a wide range of institu-
tions. "We must approach from every angle of life; otherwise, we
cannot absorb the whole population of the world. We must besiege
them."2«

In the economic sphere. Moon foresees the emergence of a
system which would respond to centralized control:

This system should eventually prevail so overwhelmingly, that even in Japan and
Germany, the people will not buy products from their own country, but will buy
according to centralized instructions. What kind of system of thought or economy
can function to give these centralized instructions? Religion is the only system that

- can do that. So in the future, this system of thought or system of economy will have
a close relationship with religious organizations. Our master is going to prepare for

J this system of economy.***

■ In the political field. Moon has spoken of using a variety of
^ ' techniques to achieve world influence. He hopes to found a political
I party: "My dream is to organize a Christian political party includ-
] ing the Protestant denominations and Catholics and all the reli-
gous sects." 2*=* Activities in cultural, academic, and other fields are
ultimately designed to create political influence and temporal
power. Cultural and educational projects are part of his organiza-
tion's overall goal of controlling major institutions in the U.S. and
other key nations and influencing political decisions and policies.
In a January 1973 speech. Moon spoke of the necessity of establish-
ing universities in seven key nations, including the U.S., and of
organizing international conferences at which cultural groups like
the Little Angels would perform. =^** He made it clear that influenc-
ing professors, scientists, and economists would be followed by
direct influencing of political figures:

After that, beyond what the professors will be able to do by influencing the

policies of the country, we will work directly with those people who, under every

:•• government now, make the policies — the congressmen, senators and parliament

. members — by organizing the World Congressmen's Association. For that purpose we

are working hard in Japan.**'

Moon has often told his followers to expect opposition to the

i 'goals he sets for them, but he assured them of ultimate "victory."

: In one 1974 speech, he noted that up to that time, opposition to his

: movement had gone unpunished. This, he promised, would change:

• * • so far the world can be against us and nothing happened. Now when they
are against us then they are going to get the punishment. So from this time ' * *
every people or every organization that goes against the Unification Church will

'♦0 Master Speaks, June 9, 1974, p. 9; see appendix C-217.

»*' Master Speaks, Jan. 30, 1973, p. 7; see appendix C-211.

*** Master Speaks, Jan. 2, 1972, p. 4. In many speeches Moon is referred to in the third person
by the translator, and is at various times called "Master," "Father," and "Our Leader." See
appendix C-210.

"' Master Speaks, May 17, 1973, p. 12; see appendix C-212.

'♦* Master Speaks, Jan. 30, 1973, pp. 5-6; see apoendix C-211.

»" Master Speaks, Jan. 30, 1973, pp. 5-6; see appendix C-211.

316

gradually come dovsrn or drastically come down and die. Many people will die — those
who go against our movement.***

Moon based his movement on a church because it provides the
greatest opportunity for reaching his goals. A UC publication dis-
cussed a change in the American organization s name from
"United Family to "Unification Church/ noting that 'The reasor
for the change is that we must ultimately have our effect on the
institutions of society." **' It is important to Moon's strategy tc
have his movement recognized as a religious one. An ex-UC
member stated:

The teachings of Sun Mjoing Moon were often referred to by other members as ar
"ideology" that would change the political systems of the world. It was made cleai
to me that so long as the church-related aspects of the group were emphasized
Moon's followers would be in a protected position as far as first amendment reli
gious freedom was concerned, and be able to take advantage of tax laws as well.**'

Components of the Moon Organization

The evolution of the Moon Organization has been in keeping
with the worldwide goals expressed by its head. Initially, it consist
ed of the "Holy Spirit Association for the Unification of Worlcj
Christianity," the precursor of the Unification Church.^** This waj!
followed by cultural, political, and economic organizations, each o]i
which in turn was able to spawn its own, separately named pro^
jects, committees, and substructures."® In many cases, the ties o:|
the subordinate organizations to the UC were carefully hidden'

For the sake of analysis, these groups can be viewed as falling
into one of three categories. The first are those whose major func
tion is to attract new members to the UC, though their relation
ship with the UC may be hidden. CARP (Collegiate Association fo]
the Research into Principles); Creative Community Project (former
ly known as New Education Development Systems, Inc. and th(
International Re-Education Foundation); the Center for Ethica
Management and Planning; and the One World Crusade are amonj
them.

A second category consists of groups which focus on the secula
goals of Moon and the UC. Examples are the International Cultur
al Foundation, which has sponsored annual international scieno
conferences on the "unification" of science; the Korean Cultura
and Freedom Foundation; and the Freedom Leadership Founda
tion.

The final category includes economic enterprises, ranging froD
multi-million dollar industries to small retail stores.

The origin and activities of the major components of the Mooi
Organization are described below.

Unification Church \

In 1954, Sun Myung Moon and a small group of his follower

founded the Holy Spirit Association for the Unification of Worl

»•« Master Speaks, Feb. 14, 1974, p. 15; see appendix C-214.

»♦' New Age Frontiers, January 1971, p. 17. New Age Frontiers was an early publication of tl
Unification Church. See SIO-II, p. 36; see appendix C-228.

»*• Statement of Linda Anthenian, p. 1; see appendix C-297.

**» This is still the formal name of the Unification Church.

"®A listing of Moon front organizations was put in the Congressional Record by Senate
Robert Dole (Cong. Rec., Mar. 25, 1976, S54246).

317

Ibhristianity (HSAUWC) in Korea. Through this group, Moon
preached his interpretation of the Bible; many of his doctrines
were summarized and expounded as The Divine Principle, which is
essentially Moon's gospel. Although Moon's teachings were not
accepted by traditional Christian churches in Korea, his movement
attracted enough converts to enable it to expand beyond South
Korea beginning in the late 1950's.

, Moon sent one of his followers, Choi Sang Ik, as a missionary to
Japan to establish the movement there; another follower, Kim
young Oon, was sent to Eugene, Ore. in 1959 for the same purpose.
By the early 1960's, Choi Sang Ik, having established the move-
ment in Japan, had moved to San Francisco, where he attempted

0 spread Moon's teachings. Kim Young Oon had by then moved to
Berkeley, Calif., while David S. C. Kim, another early Moon con-
cert, was in New York City. In 1961, Pak Bo Hi, an English-
jpeaking Korean Army officer, was assigned to the Korean Embas-
;y in Washington as a military attache. Pak had joined Moon's
novement in 1957, and while in Washington he helped to recruit
md proselytize on behalf of the movement.

In September 1961, Kim Young Oon and several other Moon
bllowers living in the San Francisco area formed a California
orporation which they called Holy Spirit Association for the Unifi-
ation of World Christianity. The following year, Pak Bo Hi regis-
ered an association of the same name in Virginia. Its address was
:iven as Pak's home in Arlington. Also living at that address, and

1 member of the original board of trustees along with Pak, was
^hoon Rhee, who later became well known as the owner of a chain
•f karate studios.

Both the California corporation and the Virginia association de-
lared that they were organized solely for religious, charitable, and
ducational purposes and that they would not, to any substantial
iegree, engage in:

• * carrying on propaganda, or otherwise attempting to influence legislation, or
articipating in, or intervening in (including the publication or distribution of
tatements), any political campaign on behalf of any candidate for public office."^

Both the California and the Virginia organizations applied for
ind received exemption from Federal income tax.^^^*

The various Holy Spirit groups in Korea, the United States, and
ilsewhere gradually came to be known — collectively and individ-
lally— as the Unification Church (UC). (Unification Church is a
iirect translation of the Korean term Tong-il Kyohoe.) The Califor-
nia corporation became the legal foundation for the national Unifi-
ation Church, (Unification Church of America), which eventually
aoved its headquarters to New York City. As of March 1977, the
'fficers and directors of the national organization were:*''^
Directors Officers

-Mose Durst Neil Salonen, president

Joseph Sheftick Edwin Ang, vice-president

Neil Salonen Rhonda Schmitt, secretary

Articles of Incorporation; see appendix C-287, p. 3. See also KI-4, pp. 697, 719.
Pursuant to section 501(cX3) of the Internal Revenue Code of 1954.
New York City application for tax exemption.

318

William Bergman David Hose

Eklwin Ang Clifford Yasutake, treasurer

Michael Warder

In addition to the national organization, State UC's were forme<
throughout the United States. Many of the officers and boards o
directors of these State UC's overlapped with the national organi
zation, with each other, and with non-UC components of the Mooi
Organization. The UC of Washington, D.C., incorporated in 1967
had among its directors in 1976: Kim Young Oon, Neil Saloner
Jon Schuhart, Michael Leone, Clifford Yasutake, Edwin Ang
Rhonda Schmitt, Michael Warder, Mose Durst, Joseph ShefticJ
and William Bergman. 2** The UC of New York at various times
had Takeru Kamiyama, Joe Tully, William Bergman, Walte
Gottesman, and Michael Runyon as directors; Tully, Runyon, Ke
miyama, and Gottesman also served as officers of the UC of Ne^
York.**^ A California affiliate of the UC which was organized unde^
the name 'International Re-Education Foundation" had as officer*
and directors Choi Sang Ik, Walter Gottesman, and Michae
Warder.««

The International Re-Education Foundation was but one of th
names used by branches and affiliates of the UC. Often, there wa
no indication that a local UC was connected to the larger organize
tion. Many ex-members reported that attempts were made to div
guise the local groups' ties to Moon and the national UC, partici
larly during fundraising and recruiting efforts.

Nevertheless, UC publications make clear the cohesiveness of th
many branches, not only within the United States, but abroad a
well. Prior to 1971, UC members in the United States generall
referred to their organization as the Unified Family.' The Januar
1971 edition of New Age Frontiers, part of which was quoted earl
er, explained the change in name to Unification Church:

In light of the need to bring ourselves into a position to effect a change i
American society, he announced the first change — our name is now the Unificatic
Church. The reason for the change is that we must ultimately have our effe'^t c
the institutions of society. The name implies respectability and stability.**'

The growth of the UC in the United States had been slow in th
1960's. Moon arrived in the United States in December 1971 to tat
charge of his movement here. Reportedly furious with the disorgj
nized state of the American UC and its lack of discipline, Y
instituted a number of reforms such as structural reorganizatioi
intensive training, and a major recruiting effort, in which Moo
himself took a leading role. There was a parallel fundraising effor
aimed at supporting the operations of the national UC headqua
ters and seminary. National fundraising teams of 10 members eac
were set up throughout the United States. It was estimated thi
were set up most of these teams could net $1,000 per day or mor
The state and regional teams were also contributing an unknot;
amount.

To meet some of the personnel requirements of the fundraisin
several hundred foreign UC members were brought into the Unit(
States in 1973 on student or tourist visas.**® Many were Japanes

"* Corporate records. See also appendix C-302

*" Corporate resolutions to Unification Church of New York; see appendix C-277.

***C€difomia application for tax exemption.

'" New Age Frontiers, Jan., 1971, p. 17; see appendix C-228.

**• Subcommittee staff interviews; SIO II, p. 24; see appendix C-292.

319

loted by Moon for their trustworthiness. Often they were assigned

0 hanclle the books and insure that the proper remittances were
aade to the national church.

Estimates of UC membership varied widely, and the subcommit-
ee made no attempt to arrive at precise figures, either for the
Jnited States or abroad. Neil Salonen testified in January 1977
hat in the United States there were 30,000 UC members, of which
,000 were "core" members who devoted all their time to the
hurch.25* Salonen also said that the UC was active in all 50 States
nd in 120 countries.

Former members of the UC and others who have closely ob-
erved it expressed the opinion that Salonen's figures were exag-
erated.2«° However, the subcommittee did confirm that the UC
/as active throughout the United States and in many other coun-
ries, particularly Japan, England, and West Germany.

itemational Federation for Victory over Communism and Freedom
Leadership Foundation

The Moon Organization began to involve itself in anti-Commu-
ist activities in the early 1960's. This was during a period when
[orean Government leaders, especially Kim Jong Pil, were stress-
\g the need to develop a strong anti-Communist ideology to
Dunter the ideology of Kim II Sung in North Korea. ^^^

Anti-Communist doctrines and activities were woven into all as-
ects of the Moon Organization. In the name of anti-Communism,
loon's followers allied themselves with powerful right-wing figures

1 Japan, such as Ryoichi Sasakawa, and openly participated in
action campaigns there; lobbied on behalf of the U.S. military
resence in Vietnam; canvassed congressional offices; picketed in
ont of the U.N.; and sponsored meetings of the World Anti-
ommunist League (WACL).^®^ In a speech, Moon told his followers:
We must have a dual organization; one is the church organization
nd the other is the Victory Over Communism organization."*®^

The principal vehicle for Moon's anti-Communist activities was
le International Federation for Victory over Communism (IFVOC)
id its affiliates around the world. (IFVOC was originally called
le International Federation for the Extermination of Commu-
ism). It was formed in 1968 and was headquartered in Seoul; its
apanese affiliate, called Shokyo Rengo, was also formed in 1968,
hile the American affiliate, the Freedom Leadership Foundation

"•Testimony of Neil Salonen before the New York City Tax Commission, Jan. 5, 1977, p. 14.

!** Testimony of Steve Hassan before the New York City Tax Commission, Jan. 5, 1977, pp.

(3-144.

"'See "Part B: Review of Korean-American Relations," pp. 28-29.

•"The World Anti-Communist League was formed by numerous national and r^onal anti-

.'•mmunist groups, such as the Asian Peoples' Anti-Communist League (APACL). It has a small

.rmanent staff, promotes anti-Communist education, and conducts annual meetings at loca-

)n8 throughout the world at which anti-Communist themes are stressed. These annual meet-

gs are sponsored by various member groups. The Moon Organization sponsored the 1970

ACL meeting, which was held in Tokyo. Osami Kuboki (also known as Henry Kuboki), head of

e Unification Church in Japan, was a key organizer for the WACL meeting; he and Donald

iller of the Korean Cultural and Freedom Foundation persuaded Senator Strom Thurmond to

pear as a guest speaker.

speaking of the 1970 meeting, Moon said: "We held a WACL meeting in Japan. At that time

aster insisted to hold (sic) the best WACL meeting ever held. He gave orders to the members

prepare for that. They made $1 million for that meeting." Master Speaks, Dec. 27, 1971, p. 9;

i appendix C-207.

•"Master Speaks, Apr. 14, 1974, p. 6; see appendix C-216.

320

(FLF), was incorporated in the District of Columbia in 1969. In
1977, the FLF directors were:*"

Neil Salonen, president; W. Farley Jones; Philip Kent Burley; Kim Young Oon;
George Edwards; Dan Fefferman; Jon Schuhart; Nora Martin Spurgin; and Judith
Barnes.

Most of the FLF's financial support came from the UC.*" FLF
obtained Federal tax exemption as a nonprofit educational organi-
zation "dedicated to developing the standards of leadership neces-
sary to advance the cause of freedom in the struggle against com-
munism." 2^ Moon was listed as its founder. One of FLF s principal
activities was the publication of a newspaper called "The Rising
Tide." In 1977, Neil Salonen was the publisher, Michael Smith,
executive director, and Dan Fefferman and Hal McKenzie, among
the associate contributing editors.

Alan Tate Wood, president of FLF in 1970 and a UC member foi
4 years, told the subcommittee that Moon had personally orderec
the expansion of his anti-Communist organization into the Unitec i
States and saw the FLF as a means of influencing and controlling ]
American institutions:

• • • in 1970 when I visited Korea, and I had several private audiences with Mr
Moon, he told me that as president of the Freedom Leadership Foundation, it wai
my responsibility to begin a campaign in the United States to win the power center
in the country.

At that time, he said: "FLF will probably win first the academic community.""

Wood further quoted Moon: "Once we can control two or thret
universities, then we will be on the way to controlling the certifica
tion for the major professions in the United States." Wood believed
despite stated purposes to the contrary, that Moon conceived of tht
FLF as a political arm of the movement.

Wood described the early opposition of some UC members towan
engaging in political activities:

At this stage in the Movement's development, the general membership was politi
cally unsophisticated. The idea of a political arm was new. The purists in th
movement who believed that a church should have nothing to do with politics voice<
strong opposition. It was pointed out to them that the Church in Japan and Kore.
carried out extensive anti-Communist political programs.

They were told that it was Master's expressed desire to begin political work in th
United States. Thereafter, members objections to political activities was considers*
infidelity to Master and was like being disobedient to God.'**

According to Wood, this policy decision by Moon, carrying with i
the force of a religious command, triggered the start of politica
activities in the United States — contrary to the statements of Sa
lonen and other Moon Organization spokesmen who portray U(
members' political activities as the free exercise of their independ
ent political beliefs.

Emphasis on support of anti-Communist activities and group
brought Moon into contact with numerous political, academic, an<
business leaders, contacts which were exploited to the advantage c
the Moon Organization. UC publications contained photos of Mooi
meeting with Eisenhower, Thurmond, Humphrey, Kennedy, Nixor

*** Records on file with the Recorder of Deeds, District of Columbia.
•** SIO-II, p. 36, see also Neil Sfilonen's testimony before the New York Tax Commission, Jai
5, 1977, pp. 40-42.
*^ Masthead of The Rising Tide, an FLF publication.
-' SiaU, p. 37.

»« sio-n, p. 36.

321

nd other American political figures; publications boasted that U.S.
ongressmen and media figures supported FLF activities, and even
eld receptions in honor of Moon.*®^

a fiternational Cultural Foundation

Moon founded the International Cultural Foundation (ICF) in
apan in 1968. Its American affiliate was incorporated in New
^ ork in 1973. Among the first directors were:

sami (Henry) Kuboki.— President of the UC in Japan, an official in the Shokyo
Rengo and WACL, and one of the Moon Organization's stockholders in the
Diplomat National Bank;

• im Young Whi.— Stockholder in II Hwa Pharmaceutical Co.;
: ik Bo Hi.— President of KCFF, UC of America; and

oon. — who was also chairman of the board,
ther ICF officers were: Neil Salonen, president
lul Werner, vice president
snnis Orme, vice president
ichael Warder, secretary
»e Tully, treasurer.^'**

A Moon Organization publication, the New Hope News, quoted
[oon in 1975 as saying that "ICF wants to make a totally new
ilture."^^^ The ICF functions principally in the academic and sci-
itific field, in much the same way as KCFF, FLF, and other
cups served in their respective fields to gain legitimacy for the
oon Organization and expand its contacts with influential seg-
ents of society.

The two main projects of the ICF are the annual International
inference for the Unity of the Sciences and the International
^adership Seminar.^^^^ The "Unity of the Sciences" conferences
ive attracted numerous prominent scientists and academicians,
eluding several Nobel Prize laureates. They are well-organized
id expensive; the New York Times reported that the 1977 confer-
ice cost the ICF $500,000.2^=^

Other units associated with Moon which are directed toward the
>al of winning scientists, academics, and members of the universi-

community are variously styled Professors Academy for World
3ace, Collegiate Association for the Research of Principles
ARP), and International Leadership Seminar. The May 10, 1974
lition of New Hope News contained the following passage relating

Moon's plans to influence American universities:

Father wants to mobilize 20 or 30 of the Korean professors to influence American
ademia, both professors and students. Because of this, Father stressed the impor-
ice of building up CARP (Collegiate Association for Research of the Principle) to

• rve as a foundation for their work when they arrive.

Father said that college campuses are a major battlefield, and if we win there we
11 definitely win America."*

In speeches to his followers and in internal publications, bow-
er, Moon made it clear that he considers science conferences and
her ICF projects to be part of his organization's overall goal of
ntrolling major institutions in the United States and other key

•• See e.g. The Rising Tide, Mar. 13, 1972. The Rising Tide is a publication of the Freedom

adership Foundation with limited public circulation.

'•New Hope News, July 7, 1975, p. 7; see appendix C-244. see also Corporate Records New

rk State.

I" New Hope News, July 7, 1975; see appendix C-244.

"New York City Tax Commission hearings, Jan. 5, 1977, Neil Salonen testimony, pp. 29-31.

'> New York Times, Nov. 28, 1977, p. 20.

'* See appendix C-236.

322

nations and of influencing political decisions and policies. The Jan-|
uary 30, 1973 Master Speaks, for example, contained a remarkable
exposition of the worldwide aspirations of the Moon Organization
and the part to be played by science and other conferences:

The policy-makers in the background are the professors. Even though they repre-
sent the cultural field, more than anjrthing else we need scholars in the scientific
fields — in the political, cultural, and economic fields. That's why we opened the
Unified Science Conference in Europe last month. Next time we will have the
Unified Economists' Conference, and after that the World Politicians' Conference
By our organizing the World Professors' Association we will have them win th«
people in each field to come and join us * * *. The scholars will set forth a
subjective ideology, uniting the different fields into one. This will be the leading
ideology of the world.

Back in their own countries, these scholars will influence their own national;
policies in a joint effort, which will enable us to direct the world policies toward th«
same goals * * * we will surely influence the policies of the whole world in thii
near future. In order to make it effective, we must have a very good university oi
our own. We must establish a university in at least seven nations: Korea, Japanji
America, United Kingdom, France, Italy, and Germany.'"

In the same speech, there is the revelation that the Moon Orga^
nization will soon "take over" a Korean university after having
worked to that end for 1 Vi years.

Unification Church International

The name ''Unification Church International" (UCI) has beer,
used in various contexts to describe the worldwide UC, apart from'
national, State, and local organizations. Pak Bo Hi talked about ill
as follows:

The Unification Church International does not belong to any one country or one
particular geographical location. It is above the national structure of our churches
so it will coordinate, assist, and spiritually guide, give the teachings and interna
tional programs organized and so forth.''*

In December 1975, Pak opened a bank account in the name oi
UCI at the newly formed Diplomat National Bank. At the time, the
status of UCI as a legal entity was unclear. It appeared that Pak
had simply adopted — without any formal legal action — the corpa
rate structure of the organization he had registered in Virginia ir
1962 under the name "Holy Spirit Association for the Unificatior
of World Christianity." (At the same time UCI letterheads werd
giving UCI's address as the UC estate in Tarrytown, N.Y., when.
Moon had his headquarters.) i

The UCI bank account at DNB was opened with an initial depos
it of $70,000 which came from funds which had been in Moon'j
personal accounts at Chase Manhattan Bank in New York. Onlj
Moon and Pak were authorized to sign checks. By March 1977, ovei
$7 million had been deposited in the account. Most of this monej.
was received in the form of wire transfers or checks from abroad'
some of which were clearly from foreign UC accounts. Over $('
million was received from Japan alone during this period. '

During the same period, the UCI account disbursed large sums
mostly to accounts of other Moon Organization groups such as tht
national UC in New York. Moon personally signed the checks oi
transfer orders authorizing the disbursement of most of these

"» Master Speaks, Jan. 30, 1973, p. 5; see appendix C-211.
"•Testimony of Pak Bo Hi, KI-4, p. 409.

323

funds, sometimes signing as "Chairman of the Board" and some-
times as "Founder" of UCI.

Beginning in late 1976, there were large disbursements from the
UCI account to Moon Organization business enterprises such as
News World Communications in New York and International Oce-
anic Enterprises in Virginia. By February 1977, these businesses
had received over $2.3 million from UCI.=*^^

On February 2, 1977 UCI was formally incorporated in the Dis-
trict of Columbia as a "not-for-profit corporation"; the incorpora-
tors were Pak Bo Hi and Pak's secretaries at the KCFF, Judith Le
Jeune and Sandra McKeehan. Among the purposes of the UCI, as
listed in the incorporation papers, were:

(1) To operate exclusively for religious, charitable, literary and scientific purposes
within the meaning of Section 501(cX3) of the Internal Revenue Code of 1954;

(2) To serve as an international organization assisting, advising, coordinating and
guiding the activities of Unification Churches organized and operated throughout
the world.

The directors were:

Pak Bo Hi; Hak Ja Han (Mrs. Sun Myung Moon), Tarrytown, N.Y.; Won Pok Choi
(a Moon aide and translator), Tarrytown, N.Y.; David S. C. Kim, Tarrytown, N Y •
and Kim Won Pil, Seoul, Korea.'"*

Although the UCI had just disbursed over $2 million to busi-
nesses— a pattern that would continue — the organization applied
' for tax-exempt status, eventually denied by the Ilfe.^^^

It was unclear whether the tJCI had any independent functions
other than serving as a financial clearinghouse for various Moon
Organization subsidiaries and projects. The address of the UCI — as
reflected on bank records — was at various times Tarrytown, N.Y.,
Pak Bo Hi's home in McLean, Va., and Pak's KCFF office in
Washington, D.C.

Korean Cultural and Freedom Foundation

The Korean Cultural and Freedom Foundation (KCFF) was incor-
: porated in the District of Columbia in March 1964 as a nonprofit
I corporation; among its stated purposes were:

(a) To accord honor and recognition to those Americans who fought and died for
the cause of freedom in Korea and to those who have aided in the preservation and
perpetuation of Korean democracy and culture;

(6) To provide, in coordination with appropriate departments of the United States
Government and the Korean Embassy, for an extensive program of support and
interchange in the fields of art, literature, the humanities and related cultural
matters;

(c) To foster a mutuality of understanding, respect and friendship between the
J citizens of the United States and Korea. ^^^

*l The first officers and directors of KCFF were prominent Ameri-
cans and Koreans who had some special interest or background in

i Korean-American relations. Arleigh Burke, former Chief of Naval
Operations, was KCFF's first president; Yang You Chan, former
ROK Ambassador to the U.S., its first executive vice-president;
while William Curtin, a retired U.S. Army officer, was a vice-
president and one of the incorporators.

^^ Financial records, Unification Church International; some of these records are in appen-
dixes C-281— C-286. , ^. o ooo
"•Incorporation papers, Unification Church International; see appendix C-^88.
"•Testimony of Sun Myxing Moon before the Securities and Exchange Comnuasion.
*~KI-4 supplement, p. 619.

35-508 O - 78 - 22

324

Pak Bo Hi was a military attache at the Korean Embassy in
Washington when KCFF was incorporated and was not an original
incorporator, director, or officer. Pak, however, testified before the
subcommittee:

The KCFF is truly my idea. I conceived this idea during my tenure as a diplomat
serving in the Korean Embassy.'"

The subcommittee found considerable documentary evidence
which indicated that Pak was the moving force behind KCFF and
that he was working for it and helping to shape its policies while
still employed by the Korean Government.*** Pak at the same time
was active on behalf of the Holy Spirit Association, the UC branch
he had registered in Virginia. Jhoon Rhee, a trustee of the Virginia
association and a close friend of Pak's, became one of the original
KCFF directors. Another original KCFF director was Robert
Roland, who had a close relationship with Pak and Rhee between
1963 and 1965. Roland told the subcommittee:

In early 1964, Col. Pak told of his plans to form the Korean Cultural and Freedom
Foundation. He stated that the purpose of the KCFF would be to gain influence and
raise money for Moon's cause * * * He described it very clearly that this was a'
front organization, and that it would be used to gain influence with wealthy people,
government officials. Then he talked very clearly about using it as a fund-raising
organization for the Moon organization.^'*^

By early 1964, Pak had already taken steps to make KCFF serve
Moon's cause, at a time when both KCFF and the Moon Organiza-
tion were in their formative stages. A December 1963 brochure
describing the KCFF — not yet formally organized — listed a Korean
children's dance group called the Little Angels as the foundation's
only proposed project.^®*

The Little Angels had been founded by Moon in Korea in 1962.***
Pak referred to the Little Angels in an application for tax-exempt
status which he submitted to the IRS in 1963 on behalf of his
Virginia UC branch. Pak stated that the branch hoped to sponsor
the Little Angels and other projects in the future, but could not do
so then "because of the present pioneer state of the church."

It is hoped that the future will allow sponsoring a Korean dsmcing group in
various cities as a means of bringing the Divine Principles to more people and to
thus further the unification of World Christianity.^***

Largely through Pak's efforts the KCFF, rather than the UC,
took responsibility for sponsoring the Little Angels, although Pak,
in his IRS application, had indicated that the purpose of the group
was to help spread the doctrines of Moon and the UC. Pak ex-
plained the KCFF sponsorship of the Little Angels to the subcom-
mittee:

Then what happened in 1964, we decided not to combine two things together, the
cultural things done culturally, which is done by KCFF. That is why we organized
the KCFF. In my testimony, I said the KCFF is my idea, so the church did not then
tackle the Little Angels program.^*'

"' Testimony of Pak Bo Hi, KI-4, p. 171.

»" KI-4 Supplement, pp. 209-360.

«" Testimony of Robert Roland, SIO-II, pp. 16 and 34.

»" KI-4 Supplement, pp. 229-232.

"» Testimony of Pak Bo Hi, KI-4, p. 390.

»«« KI-4, appendix 16, p. 701.

"' Testimony of Pak Bo Hi, KI-4, pp. 440-441.

Robert Roland testified that Pak hoped the Little Angels would
"create influence for their movement, and also for the Korean
Government/' ^as ^ passage from the June 15, 1965, issue of the
UC's New Age Frontiers described the Little Angels as "a group of
Divine Principles children who perform traditional Korean
dances." ^89 j^ later years, the Little Angels were officially spon-
sored by the Korean Government on world tours; also in later
years, Moon's connection with the Little Angels and his increasing
use of them to further his own purposes became more apparent. ***>

By December 1964, U.S. intelligence agencies had reported on
Pak's plans to link the KCFF to the UC.^*^

The subsequent history of KCFF is closely related to some of the
most controversial issues in Korean-American relations; these
issues are discussed in detail in other parts of this report.**^ Al-
though KCFF was often involved in foreign policy controversies
beginning in the mid-1960's, causing it to receive attention from a
number of U.S. agencies, its ties to the Moon Organization were
not widely recognized prior to 1976. Until then, the KCFF had
numerous supporters, advisers, directors, and contributors who
were totally unaware of the connection.

In 1976, there was a split among officers and directors of KCFF
over Pak's management of the foundation; there were public alle-
gations by KCFF members that Pak was using KCFF as an arm of
the UC. As a result of this feud, the Moon Organization's control
over KCFF, which had been developing since the earliest begin-
nings of the foundation, became complete.**^

Business enterprises

The Moon Organization controls numerous large and small busi-
nesses throughout the world and is constantly expanding into new
business fields. These organizations are set up under a variety of
names and often emplov holding companies and other complex
corporate structures so that their relationship to the overall Moon
movement is not always apparent to a casual observer. However,
the subcommittee found extensive evidence that many business
enterprises — regardless of name or legal structure — are an integral
part of the Moon Organization and are used interchangeably with
its nonbusiness components.

Even the crudest analysis of the structure of Moon's businesses
shows that, as with his nonbusiness organizations, there is a pat-
tern of interlocking directors, officers, and stockholders. The inter-
relationship of the businesses with the UC and other components
of the Moon Organization is also made explicit in internal UC
publications. There are frequent references to the "family" busi-
nesses. An illustrative example is found in a speech Moon gave to
his followers:

After speaking about the necessity for God's children to surpass every standard in
the Satanic world, which of course necessitates a solid financial foundation, Father

*** Testimony of Robert Roland, SIO-II, p. 34. .

*•• KI-4 Supplement, p. 406.

»^See pp. 359-361 of this report. * ... „

"•'See Part C-III: "Executive Branch Awareness of Questionable Korean Activities, pp.
118-119, and KI-4 Supplement, p. 459. , , ,, ^ ^. .^. „

*"See Part C-IH: '^Executive Branch Awareness of QQestionable Korean Activities, pp.
118-121, and other sections.

"'Some of the details of how this takeover was managed are set forth on pp. 4ijl-oo^.

326

talked about Family businesses in Korea: Tong-Il Industries (machinery), the tita-
nium plant, and the ginseng tea factory. He described significant expansion of the
titanium plant (titanium is a metallic element used in alloys such as steel and in
paints and other coatings), and he talked about the uncommon abilities of the Tong-
Il engineers to design and produce reliable and sophisticated machinery, enabling
the company to win many defense contracts from the Korean government. He said
the field we will enter next is that of electronics."*

In Korea, the most important Moon businesses were Tong II
Industries Co., II Hwa Pharmaceutical Co., II Shin Stoneworks, and
Hankook Titanium Industrial Co. The Korean businesses had affili-
ates and export outlets in other countries, particularly Japan,
where Tong II Industries was run under the name of Toitsu
Sangyo.

The subcommittee did not obtain detailed financial and produc-
tion data about the Moon industries in Japan and Korea, and
Moon Organization spokesmen have been reticent in disclosing
details. In a 1976 Newsweek interview, for example, while Moon
acknowledged that his Korean industries had defense contracts
with the Korean Government, he would not disclose what arma-
ments were being produced on grounds that the information was
classified.^*^ Pak Bo Hi, in testimony before the subcommittee,
acknowledged that Tong II made "sophisticated military instru-
ments," but said he did not know which particular instruments,
although he was certain Tong II did not have anything to do with
the production of M-16's."«

Data compiled by the U.S. Department of State in 1976 showed
the following about the principal Moon business in Korea: ^*'

(1) Tong II Industries Co.

Tong II is the only one of Moon's industries designated by the
ROK as a defense contractor. It manufactures air rifles, lathes,
milling machines, boilers, and parts for the M-79 grenade launcher
and the vulcan gun.=*®« Tong Il's main stockholders were: ^^^^^^

Unification Church 53

Kim In Chul (former president of Tong II) 36

Moon Sung Kyvm (president as of 1978) 4

Boek Ku Sub (executive director).. .006

The remainder of the stock was held in small amounts by 100
persons.

The report stated that Tong Il's 1975 sales were $4 million, with
$488,000 in profits. Assets were listed as $4,666,000.

The State Department report identified Kim In Chul as a i
member of the UC's board of directors.

(2) II Hwa Pharmaceutical Co.

II Hwa was formed in 1971 to make and export ginseng extracts,
primarily to Japan. Stock ownership was:

»^ New Hope News, May 10, 1974; see appendix C-236.

*»» Newsweek, June 14, 1976, p. 39.

»« Testimony of Pak Bo Hi, KI-4, p. 477.

29' All information on the businesses as set forth on p. 326 (middle) top p. 328 (top), was derived
from declassified State Department cables. „„^t^ r. r

"*For further information on Tong Il's role as a Korean defense contractor, see ROK Defe^
Production and Military Self-Sufficiency" in "Part C-1: Security and Political Affairs, pp. 81, 83.

327

KimWonPil "^^g

Hong Sung Pyo c f

Lee Yo Han ZZZZZZ 14

Lee Soo Kyung * " ^ V

Kim Young Hui !"!!!!"!"," 1*9

Lee Sang Hon .!!!!!]!!.!!.....!..!.".,"." 15

Ownership of the rest of the stock was not given. In 1975, assets
were $2.8 million, profits $1 million, and total exports $9,957,000.
The U.S. representative was given as Lewis Burgess, Tong II Enter-
prises, N.Y.

(S) II Shin Stoneworks

II Shin manufactures stoneware vases. Exports in 1975 totaled
$600,000 and were handled by Tong II Industries (Japan) and
Shiawase Shoji Co., both located in Tokyo. II Shin's stockholders
were listed as:

Percent

Unification Church 22.3

Moon Sung Kyun {15

KimWonPil Z.ZZ" 10

Yoo Hyo Young I3 33

Chung Yoon Chang 8,33

Kim In Chul 5^84

Ownership of the remaining shares was not disclosed.

(4J Hankook Titanium Industrial Co. and Dong Hwa
Titanium Industrial Co.

The reports stated that Hankook Titanium was established in
1968 and became a joint venture with UC-Korea in April 1972.
Stock ownership was:

Percent

UC-Korea 76

UC-Japan 5.32

Sun Myung Moon 1,49

Seung Kyun Moon 0.77

The report listed Hankook Titanium's 1975 assets as $4.9 million,
gross sales $2,296,000, and profit $87,000.

Dong Hwa Titanium produces titanium dioxide, which is market-
ed in Korea to paint, rubber, and ink industries. It was established
in 1973 and became a joint venture with UC-Korea in April 1974.
Sun Myung Moon was chairman of the board and owner of 90.5
percent of the stock. A Japanese national named Yaii Junsei was
listed as owner of 6.6 percent of the stock. Dong Hwa s assets were
put at $2.2 million, 1975 gross sales at $1,302,000, and profits at
$164,000.

According to the State Department information, the combined
1975 assets of the five businesses mentioned above were
$14,970,000, with 1975 profits of $1,910,000, net worth of $7,410,000,
and total 1975 sales of $18,627,000. The profit ratios of the Moon
businesses were ''slightly above average ' for Korean businesses.

The State Department reports also stated that the executives in
all five businesses were trained at Tong II Industries and that all
important shareholders were active UC members.

A separate section of the State Department report commented
that official Korean records indicated that the UC-Korea claimed

328

$3,600 in assets; however, published financial statements showed .
assets, as of December 31, 1975, to be $4,535,000, with a net worth I
of $4,516,000.

The State Department's information was derived from World
Traders Data Reports, which in turn are generally based on public
sources and inquiries of industry representatives, and not on
audits

Earlier data gathered by the Export-Import Bank showed Tong D i
Industries 1972 sales to have been $400,000; ^s* if both the Exim-
bank and State Department figures are accurate, Tong IFs sales
volume in 1975 was 10 times higher than in 1972. This increase j
was consistent with executive branch reports and with the state-
ments of a number of persons interviewed by the subcommittee to
the effect that Tong Il's fortunes rose with the development of
ROK defense production.

A UC publication contained an article on the titanium plant
which described how the UC took over its operation in 1972.=»~
After that, it was managed and operated mostly by UC members.
In describing future plans for the factory, it was noted that tita-
nium is used in aircraft and spaceship production. In another UC
publication, Neil Salonen reported on a tour of the titanium plant
and Moon's plans for its expansion:

Father wants to expand and build the factory as soon as possible. We have a
monopoly on the refining of titanium in Korea and actually a large comer on the
world market because we can do it in a very sophisticated way.'®^

In January 1977, the ROK Government charged Kim Won Pil
and other officers of II Hwa Pharmaceutical Co. with conspiring to I
evade over $12 million in taxes, in addition to other offenses. A
State Department cable reported that the specific charges included: i.

Falsely reporting purchase price of raw ginseng, falsely reporting capital in-
creases by disguising stock distribution, failure to pay taxes on property acquired in i
the names of employees, and income tax avoidance by donating money to the
Unification Church.^**

The cable quoted Korean newspaper accounts which claimed that
$6.2 million was transferred to Moon's church from II Hwa without
tax payment. It was noted that Korean law does not permit trans-
fer of moneys when the same person — in this case Kim Won Pil—
headed both a taxable and tax-free foundation. In that connection,
the State Department commented:

Kim Won-pil, president of II Hwa Pharmaceutical, is also chairman of the board
of directors of the Holy Spirit Association for the Unification of World Christianity
(see 76 Seoul 5612). He also holds 1 percent of the shares in II Shin Stone Works,
and was executive director of Tong-il Industries, the Moon firm designated a defense
industry by the R.O.K.G.'"'

In the same month that this State Department report was writ-
ten (February 1977), Kim Won Pil acquired still another title in the
Moon Organization when he became a director of the Unification
Church International (UCI). Kim was one of Moon's earliest follow-
ers and had been arrested with Moon in 1955.'°*

*»» Subcommittee staff interview with Barbara Guarnieri, Export-Import Bank.
^Vfay of the World, Oct. 1973, pp. 110-115. Way of the World is a pubhcation of the
Unfication Church. See appendix C-234.
'«» New Hope News, Feb. 8, 1975, p. 4. See appendbt C-242.
=""' Department of State cable, February 1977.
*<» Ibid.
^*See p. 353, this section.

329

The State Department cable referred to possible political motiva-
:;ions by government officials in bringing the charges:

C!ommercial sources indicate the II Hwa investigation may be a strong attempt by
^.O.K.G. to disassociate itself from Rev. Moon. Embassy sources indicated that the
nost likely reason for the arrests was to serve notice to Rev. Moon not to interfere
¥ith Korean politics, domestic or foreign.****

The subcommittee did not have access to the specific evidence
produced by Korean authorities to support the charges against the
il Hwa officials. However, the State Department report on the
charges, especially the portions on use of employee names to dis-
guise stock ownership, use of the UC to avoid taxes, and directors
md officers in common to both taxable and tax exempt organiza-
;ions, described practices of the Moon Organization in the United
5tates.

One of the earliest significant business ventures in the United
5tates was Tong II Enterprises, which was incorporated in New
ifork in June 1973. The certificate of incorporation was signed by
Pakeru Kamiyama, and the first board of directors and their stock-
loldings were: ^°*

Jun Myung Moon, chairman of the board 25 percent

Ars. Sun Myung Moon 10 percent

'akeru Kamiyama 5 percent

vTio Woo Eukman 5 percent

iichael Warder 2 percent

leil Salonen 1 percent

)aikon (Kenji) Ohnuki 0.05 percent

oe Tully 0.05 percent

tobert Wilson 0.02 percent

Tong Il's msiin activity at first was the importation and market-
ng of ginseng tea and marble vases from Moon's companies in
Corea; later it became involved in Moon's tuna fishing enterprises.

On the west coast the Moon Organization opened International
Exchange Enterprises. It in turn ran a maintenance company and
iwned a travel agency, Seno Travel Services. Daikon Ohnuki was
me of the original directors of International Exchange Enterprises
jid owned 100 percent of the stock; in 1974 he transferred this
tock to Sung Soo Kim, who was an officer in the travel agency.

Another officer of both International Exchange and Seno was
'hoi Sang Ik, founder of the UC in Japan and San Francisco and
or many years a leading figure in the Moon organization. ^°^ A
ormer UC member who worked for International Exchange stated
hat while the company was denying any link to the UC she was
urning in her pay checks to the leader of the UC organization in
he San Francisco Bay area. ^°*

Media enterprises were also set up in the United States based on
imilar ventures already begun in Japan. In January 1975, the
Vorld Daily News Co. had been opened in Japan and began print-
ng a daily newspaper (Sekai Nippo) there; Mitsuharu Ishii was the
•resident. 3<*^ In February 1975, Moon has said in a speech to U.S.
aembers:

»«• Department of State cable, February 1977.

**• Certificate of Incorporation. m_ i o. •

»*" Corporate papers of International Exchange Enterprise and Seno Travel Service.

~« Affidavit of Patricia O'Shea.

^ Testimony of Pak Bo Hi, KI-4, p. 326.

330

This year we have to expand our UN campaign, work among all the Senators anc;
Congressmen with our PR brothers and sisters, and we are going to establish £|
university. Another thing we are going to do is to start a newspaper plant.'"

In the same speech, Moon said that UC "missionaries" arounc
the world were to become involved in media activities, including
setting up an international paper, in order "to guide the academic
world including professors, the communications world, and ther
the economic world."

As Moon predicted, a daily newspaper was opened in the Uniteci
States — in December 1976, News World began publication in Ne\*i
York. Among the officers and directors of the parent corporation
News World Communications, Inc., were Dennis Orme, president
and Michael Trulson, secretary. Orme had been president of thi
UC in England and a director of ICF. The News World was staffec
almost exclusively by UC members; for example, the editoriaj
board included Michael Young Warder, Joachim Becker, Keith
Cooperrider, and Hal McKenzie, all of whom had occupied positional
in the UC hierarchy.

The competitive advantage UC staff members gave News World
was apparent in August 1978, when a strike shut down the majoi
New York dailies, making News World for a time one of the onlj
choices for New Yorkers. During this strike, the Washington Posi
quoted Michael Trulson of News World as saying that the papeij
was financed by "friends of Moon — businesses operated by memf
bers of the Unification Church of America." ^^^ However, tjnifica
tion Church International financial records at the Diplomat Na
tional Bank revealed that Moon personally directed much of th^
early funding of News World by transferring funds from UCI, nol
from businesses. ^^^

News World served, when needed, as a propaganda instrument ol
the Moon Organization. A casual reader would not detect its UC
affiliation on most days. On issues affecting Moon and the UC
however, the resources of the paper were mobilized along with
other components of the Moon Organization to attack and discredit!
critics and investigators. One issue of News World, for example
carried an article with photographs of IRS agents auditing thf|
books of the UC, written to suggest the IRS was harassing the'
church. ^^^ Similarly, News World printed numerous derogatory ar
tides about the subcommittee's investigation and its chairman;
including articles accusing the chairman of being a Russiar
agent. ^^*

News World and its counterpart in Japan were not the onl>l
ventures into the media and communications field. In July 1974
Moon had told his followers: ''Even a movie company is bein|S
formed right now in Japan" ^^^ It was set up under the aegis of Onei
Way Productions, with offices in Tokyo and Los Angeles. The heac:
of this company was Mitsuharu Ishii, who, as noted, also headec
Tong II Industry's Japanese branch (Toitsu Sangyo), was an officer
in the ICF, and was involved in funding various stock purchases ir

»«> Master Speaks, Feb. 16, 1975, p. 9; see appendix C-224.

»" Washington Post, Aug. 10, 1978.

'" See p. 373 of this section.

'"News World, Feb. 2 and 3, 1978. See appendixes C-244, C-248.

'"One was cited in Korea Herald, Dec. 11, 1977. See appendix C-246.

'"Master Speaks, July 29, 1974, p. 15; appendix C-218.

331

the DNB.3i« One of the employees in Los Angeles was Robert
Standard, a UC lawyer who represented the Moon factions of the
KCFF in an internal conflict in 1976 and 1977. ^i^

One Way Productions, like News World, was used for propagan-
da purposes. At the time of Pak Bo Hi's testimony, the proceedings
were filmed by crews under Ishii's direction; the films were later
edited and used to make a ''documentary" of the hearings, shown
to UC members in various locations and aired on TV stations in
Korea."* Ishii himself was present at one of Pak's appearances
before the subcommittee; later, when Pak's testimony pointed to
[shii as the source of funds for Diplomat National Bank stock
purchases, the subcommittee learned he had returned to Japan.
Attempts to communicate with him were unsuccessful.^^®

The Moon Organization also invested heavily in fishing and ship-
ping enterprises in the United States. A former UC member re-
called Moon speaking of ''dominating the tuna fishing business." "^^
[n November 1976, International Oceanic Enterprises was incorpo-
rated in Virginia, along with its subsidiary International Seafood
3o. The 1978 annual report filed with Virginia authorities listed
:he officers and directors of International Oceanic Enterprises as
follows."^

Bo Hi Pak, president; Won Dae Chi, vice-president; Judy LeJeune, secretary;
rene Cooney, assistant secretary; and Bonnie J. Prechtl, assistant treasurer.

The directors were:

Bo Hi Pak; Sun Myung Moon, Neil A. Salonen; Mose Durst; Michael Young
tVarder; Takeru Kamiyama; and Joseph Sheftick.

Moon and Pak provided the initial capital through the UCI ac-
count at the DNB; later infusions of cash from UCI totaled millions
)f dollars. Among the disbursements made by the seafood business
n its early months was $200,000 to Tong II Enterprises on Decem-
ber 27, 1976."^

These transactions again illustrate how the components of the
tVloon Organization work together as an economic unit. In the 7-
nonth period from October 1976 to May 1977, nearly $1 million
vas poured into the fishing business from other Moon enterprises,
rhe transfers from UCI were particularly illustrative since Moon —
vho signed the checks — and Pak Bo Hi held positions in both UCI
md International Oceanic Enterprises, and Pak was president of
)oth organizations. The transfer from the seafood company to Tong
1 Enterprises in New York similarly involved taking money from
)ne Moon Organization pocket and putting it into another.

In 1977, the fishing interests expanded with the purchase of 700
icres of waterfront property in Alabama reportedly for a fishery
md shipbuilding industry. Part of the down payment was $400,000
provided by International Seafood's account in Norfolk.''*^

'"Testimony of Pak Bo Hi, KI-4, pp. 283-297, 315-318.

'"See p. 361 of this section. , «. .

*'• Subcommittee staff interview with Tongsun Park and other confidential staff mterviews.

"•Testimony of Pak Bo Hi, KI-4, pp. 346-347. Letter from Subcommittee Staff Director Robert
i. Boettcher to Mitsuharu Ishii, July 12, 1978.

** Statement of Phillip Greek; see appendix C-299. .

*»• Subcommittee staff memorandum on corporation papers of International Oceamc Enter-
•rises.

»" Financial records of Unification Church International. See appendix C-250, 280, 283.

»*» Subcommittee staff interview with Kenneth Giddens, Apr. 24, 1978, concerning the Ala-
•ama land purchase; financial records, Unification Church International. See appendix C-283.

332

By 1978, UCI money was also being put into other businesses and i
holding companies, such as One Up Corporation, U.S. Marine]
Corp., U.S. Foods, and II Hwa American Corp.^**

Issues Revealed by the Investigation

As the investigation proceeded, certain patterns emerged. The
various units of what came to be called the Moon Organization had
overlapping directors and officers and used personnel interchange- \
ably. They were tied to one another through joint activities, flnanc- i i
ing, and mutual use of projects. They were involved to varying
degrees with the Korean Government. They carried out activities, \
especially political and anti-Communist ones, that conflicted with
the purposes set forth in their corporate charters. Furthermore, 1
several of these activities were in apparent violation of U.S. tax- :
exempt and nonprofit corporation laws, as well as U.S. immigra-s,
tion laws and those governing the international movement of cur- i
rency. Drawing on the information relating to the individual units
of the Moon Organization, this section looks at specifics of the i
issues summarized above: the cohesiveness of the Moon Organiza-
tion; its political activities; its ties to the Korean Government; its
economic and financial activities; and apparent violations of U.S.
laws.

Cohesiveness of the Moon Organization

The subcommittee's finding that there is essentially one *'Moon
Organization" worldwide, rather than a number of separate organi-
zations "founded" or "inspired" by Moon but otherwise operating
as independent entities, is contrary to the image Moon and his H
associates seek to create by carrjdng on their activities under the j;
aegis of numerous corporate and other legal structures. UC leaders l
and Moon associates have, in many public and official statements,
repeatedly denied or minimized the connections between one Moon-
related organization and another.

As part of their applications for tax-exempt status. Moon's
spokesmen have had to address the issue of the interrelationships jJ
that exist in their movement. In April 1963, in an application to "
the IRS for tax-exempt status for the branch of the UC he regis-
tered in Virginia, Pak Bo Hi stated:

The Holy Spirit Association for the Unification of World Christianity is affiliated
only on a doctrinal basis with a movement which began in 1954 in Korea, at the end
of the Korean War * * *

The Association is consequently affiliated with the California organization and
with the Korean and Japanese movements on the basis of the similar and common
doctrine of the gospel of the Divine Principles, but this organization is totally and
independently organized; there is no formal organizational tie with any other orga-
nization. We would, of course, look to the Korean movement as the fountainhead of
the spiritual principles and theological bases of our church, but outside of this
spiritual indebtedness and spiritual common interest, there are no affiliations or
formal connections.^^"

In testimony before the New York City Tax Commission Neil
Salonen, President of the UC of America, was questioned about the
relationship between that church and other "Moon organizations."
He minimized the interrelationships. Asked about the Freedom

'»* Financial records, Unification Church International. See appendix C-283.

"» Virginia application for tax exempt status submitted by Pak Bo Hi, KI-4, p. 689.

I 333

||jeadership Foundation (FLF), he said that only one officer of FLF
vas also an officer in UC of America. Salonen refused to answer
low many board members of FLF were UC members. He admitted
hat the UC had provided 60 percent of FLF's funds during a
ecent year, but stressed that this was but a small percentage of
he church's total expenditures.

As for the relationship between the UC of America and Unifica-
ion Church International, Salonen asserted there was no connec-
ion "other than a spiritual bond of the heart." (In fact, by January
977 the national UC had transferred money to UCI and in turn
eceived over $1 million from UCI.) Salonen called News World "an
ndependent corporation" to which the church rented space, but
irhich was funded by UCI; he said that International Federation
or Victory Over Communism had "no connection with the Unifica-
ion Church in America." Salonen admitted he was an officer of
he ICF, as well as the FLF and the UC, and that the UC provided
ands to FLF and ICF. However, he pointed to a statute making it
3gal for one nonprofit organization to donate funds to another.^**
. Salonen, Pak Bo Hi, and other UC leaders have also emphatical-
/ denied on various occasions that the Korean Cultural and Free-
cm Foundation (KCFF) is part of the Moon Organization. Regard-
ig the Little Angels, a KCFF project, Salonen stated: "The Little
jigels and the UC may share the same founder, but otherwise
tiere is no connection." ^^"^

In testimony before the subcommittee Salonen said that, so far
s he knew, the KCFF was not directly or indirectly controlled by
Ioon."»

In these and numerous other statements and representations,
loon and his spokesmen have tried to keep intact the corporate
eils which maintained the outward appearance of separate and
idependent organizations related, if at all, only through a
Dmmon founder or by a loosely defined "spiritual bond." These
E)okesmen often turned away questions about the actual relation-
tiip between the UC and other organizations on the grounds that
rC membership is "irrelevant" and that to inquire about the reli-
ious background of the members of a given organization violates
onstitutional rights.

Central to the official posture msiintained by the UC and its
3okesmen is the portrayal of Moon as a founder and spiritual
jader, with little or no responsibility for his organization's fiscal,
dministrative, and other worldly matters. Before the New York
ax Commission, Neil Salonen stated:

Rev. Moon is considered the prophet of the Church and the founder. Other than
'i ;iat he has no specific relationship.'"

alonen went on to say that Moon received "no compensation
whatsoever" from the UC and that expenses paid on Moon's behalf,
lostly for travel, amounted to only a few thousand dollars in a
3cent year. Salonen did not know how Moon provided for his

*»• Testimony of Neil Salonen, New York City Tax Commission hearings, Jan. 5, 1977, pp. 32,

*" Statement of Neil Salonen submitted to the subcommittee in support of his testimony on

pt. 30, 1976. , ^

**• Testimony of Neil Salonen, executive session of Subcommittee on International Organiza-

)ta Sept. 30, 1976.

•"New York City Tax Commission hearings, Jan. 5, 1977, p. 22.

334

personal expenses. He said that Moon "provides spiritual guidance
to the movement all over the world," but that he "doesn't direct
the affairs of the organization in an administrative or physical
sense."

The subcommittee found, to the contrary, that Moon provides
considerably more than spiritual guidance to his worldwide organi-
zation. The statements and testimony of former members and offi-
cials in Moon's Organization, evidence gleaned from internal UC
publications, memos, other documents, and financial records all
show that Moon exercises substantial control over temporal mat^j
ters. These include the transfer of funds from one organization tc
another, personnel changes and allocations, the structure and oper-l
ation of fundraising teams, the timing and nature of political dem-ij
onstrations, and the marketing of goods produced by the organizaJ
tion's businesses. As in any organization so large and complex,
there are advisers, lieutenants, and managers with varying degrees
of influence and authority to speak and act on behalf of the organin
zation; however, there is every indication that regardless of th^
title he might or might not hold in any one corporate structure^!
Moon can and often does make the final decision on a course ol
action.

To gatherings of his followers, Moon makes it clear that he
would occupy the position of authority in the future world ordei^
which is his goal. In one speech, he said:

The time will come, without my seeking it, that my words will almost serve as
law. If I ask a certain thing, it will be done. If I don't want something, it will not bei
done. If I recommend a certain ambassador for a certain country, and then visit
that country and that ambassador's office, he will greet me with the red carpet
treatment.""

Interchangeability among organizations, personnel, and funds

Former UC members commented on the use of UC personnel
other Moon organizations. One said:

All members of the UC are used interchangeably in any of the 60 front organiza-('|
tions, as needed or assigned by Moon.'^*

Another former member, Linda Anthenian, stated that all U<
members automatically became members of FLF as well:

According to Moon's dualistic thought, the Unified Family [UC] would be the|
inner, policymaking force, while the FLF would be the outer, active political arm ol
the movement. * * * On any one day, I could act as a representative of the Unified
Family and pass out literature for it, and then turn around at a moment's notice
and disseminate political brochures for the FLF.'^^

Another former member, Phillip Greek, spoke of using donations
to the UC to fund various businesses:

In the future it was the hope of Rev. Moon that the Church would become oni
vast conglomerate of mutually supporting businesses ♦ * ♦ 333

An April 1973, Directors' Newsletter — an internal publication
circulated to church centers on a regular basis — conveyed an^
nouncements and instructions from Moon: He said that by April
1975, missionaries were to be sent to 120 countries and gave

"« Master Speaks, Mar. 24, 1974, p. 9; see appendix C-215.
"» Statement of Diane Devine; see appendix C-300.
"'» Statement of Linda Anthenian; see appendix C-298.
"» Statement of Phillip Greek; see appendix C-299.

335

nstructions to UC members regarding the sale of ginseng tea and
he importation of stone vases, both products of Moon industries in
^orea; =»^* on September 1, 1973, a newsletter reported that Gary
kharf had been appointed by ''our leader" to be first head of the
:k)llegiate Association for Research of Principles (CARP); 335 in a
nemo, David Kim repeated "detailed instructions" from Moon.
Cim spoke of European fundraising units as being ''under Master's
lirect command." ^'« He announced that shipments of ginseng tea
lad been received at UC headquarters and said:

Our Master plans to explore a worldwide market for this heavenly product, along
dth worldwide spread of Unification principles for mankind.'*'

Other memos gave instructions to UC members on how to
Qarket ginseng tea.
In a January 31, 1974 speech, Moon said:

We are going to have a strong worldwide movement. Therefore, we must have a
trong worldwide organization."*

In the same speech he told his followers:

The world is really our stage. We are going to be the ones who restore and bring
ope to every comer of the world. The money is there, and I will earn that money. I
ill reap the harvest. And you will become soldiers, trained soldiers.

Some of the "trained soldiers" in Moon's worldwide organization
^ere the UC members he sent as "missionaries" to various coun-
ties. In a speech quoted elsewhere,^^® Moon explained how he
itended to use these missionaries to "open avenues to commerce"
1 many nations and to serve as reporters for Moon Organization
ewspapers in Japan and the United States.^*®

Moon s ability to order trained followers to undertake diverse
lissions around the world enabled him to bring fundraising teams
) the United States and to move large amounts of cash across
iternational boundaries. His methods for doing this were frequent-
ly illegal or questionable under U.S. law as well as those of other
ations.

Beginning in the early 1970's, Moon brought hundreds of foreign
IC members into the United States, many of whom entered the
auntry on visitors visas which permitted them to remain in the
Duntry for only a limited time.=**^ Once these members were in the
Jnited States, most were assigned to mobile fundraising teams,
loon Organization businesses, or other mone)nnaking activities.^**

In early 1974, the UC petitioned the Immigration and Natural-
nation Service (INS) to change the status of over 500 aliens from
tourist" to "religious trainee," which would allow the aliens to
emain in the United States for a much longer period.^" The INS
enied these petitions on the grounds that the "missionary training
rogram" consisted primarily of fundraising and that this activity
iolated the terms of the visas.

*" Directors' Newsletter, Apr. 1973., p. 4; see appendix C-230.
\ *** Directors' Newsletter, Sept. 1, 197^, p. 3; see appendix C-233.
*** This memorandum is dated Mar. 10, 1973.
*** Contained in Davis Kim's memorandum of Mar. 10, 1973.
"• Master Speaks. Jan. 31. 1974, pp. 2, 5; see appendix C-213.
"•See p. 378 of this section.

»*> Master Speaks, Feb. 16, 1975, p. 9; see appendix C-224. .

*** Summary of investigative action by the Immigration and Naturalization Service concerning
ien UC members; see appendix C-292.
*** Subcommittee staff mterviews.
**» Summary of INS investigation; see appendix C-212.

fflC

k
m
i

336

In April 1974, at the time the problem with the INS begun, Mooi
emphasized the importance of foreign members to his plans in th(*
United States and spoke of preventing their deportation by U.S
authorities:

And right now our foremost problem is the difficulty with the Immigratior
Department. Unless we can successfully obtain legitimate residency for our foreigi
members, our movement will suffer a setback. We cannot fail to do this. If we d<
fail, my entire strategy will be totally altered, because all the foreign members hen
will have to leave. Therefore, by all means, at any cost, we must win the immigra
tion battle."*

In a later speech he said: "The Immigration Office is planning U, s.
send back the Unification Church members from other countries ilfoi
Very possibly the Communists are behind this."^*** Ijvi

As a result of U.S. pressure. Moon eventually sent several huniftrj
dred foreign members out of the United States before any proceed^^e
ings were brought against them. The INS took no action to enforce jijgii
the departure of UC members found to be violating their vis£ ||
status, pending administrative proceedings and appeals; this procj ^ti
ess has taken several years.^*« As a result, numerous aliens have
been able to continue carrying on their fundraising activities wit!
little or no interference from U.S. authorities. In the meantime
other aliens had been arriving and departing,^*' and violations o:
visa regulations continued.

As indicated in the above passages, the Moon Organization triec
to and did exploit the inadequacies of U.S. immigration laws ancj
enforcement mechanisms, or ignored them. Both the fundraisin§
and business activities violated the terms of tourist and other visas
People stayed beyond the length of their visas, thereby becomin§L ,
illegal aliens. In addition, the UC took advantage of cumbersome' yl
INS procedures to delay deportations and apply for changes Oj'
status for UC members. | ^^

In the case of one of the key members of the UC, Takeru Ka' ^^^
miyama, the Moon Organization, through a financial sleight-ofi ^f!
hand, was able to have his visa status changed to one which would ^^'
permit him to stay in the United States. Kamiyama applied for ar fl
E-2 ''Treaty Investor" status in 1973 on the grounds that he was ^ "J
Japanese national engaging in a trading enterprise in the Unitec* f^
States, that is, Tong II Enterprises.^** When he first applied, Ka "^
miyama owned 5 percent of Tong Il's stock, the balance beinf' ^^
owned by Moon and other Korean and American UC members^ '^
When it was discovered that INS regulations required that th^t
trading company be more than 50 percent owned by members o:
the same nationality, Kamivama, a Japanese, was awarded 5^
percent ownership of Tong II s stock, making him eligible for trad
er's status. This he received on January 21, 1975.^*® By this simple
maneuver, the Moon Organization was able to overcome a potentia
INS problem. The incident shows the advantages of having the
components of the organization work together as a cohesive unit

The importance to the Moon Organization of free transfers o:
money and personnel across international boundaries and back anc

re<
kb
hii

Stlj

'" Master Speaks Apr. 14, 1974, p.7; see appendix C-216.
»*» Master Speaks, Feb. 23, 1975, p. 3; see appendix C-225.
*** Summary of INS investigation; see appendix C-212.
**' Subcommittee staff interview with UC member.
^ INS files.
»*• INS files.

337

)rth from religious to political or business activities is implicit in
lany of the speeches and documents already discussed.

In addition to raising funds and providing a work force for Moon
•rganization business projects, UC members who travel in and out
r the United States are vehicles for circumventing or violating
jstrictions on the international movement of currency.
Several persons interviewed by the subcommitte staff stated that
rominent Moon Organization figures had admitted bringing in
irge amounts of cash from Japan by concealing it on their per-
ms-^^'o Since 1972, U.S law has required that all persons moving
ish in excess of $5,000 in or out of the country fill out a Treasury
jport.3" Japan has similar requirements, as well as limitations on
)nverting yen to other currencies.^" Korea, too, has very strict
irrency control laws. Converting won to dollars in order to take
oney out of Korea, except in very small amounts, is almost im-
)ssible to do legally.^" Despite these laws, the subcommittee
und evidence that large sums of cash maintained in the United
"^^es by the Moon Organization had apparently been brought in
om overseas.

In 1974, Moon opened accounts and time deposits at Chase Man-
ittan with $995,200, about half in cash, deposited at a time when,
xx)rding to Moon, most financiad support for his movement came
om overseas.^*" Pak Bo Hi testified that between 1972 and 1974,
J received $223,000 in loans from Mitsuharu Ishii, some of which
ik brought back from Japan himself, while the rest was delivered

him in the United States. All of this money was received in

sh, and Pak could not explain where Ishii — who is a full-time

•aployee in various Moon Organizations — derived the money he

!nt Pak.''^^ Pak also could not explain how $58,000, which he says

J received from Ishii via the head of the Little Angels Touring Co.

e could not remember the person's name), got into the country;

! suggested that perhaps the money had beien "divided" among

e Little Angels, each of whom would carry less than $5,000.=*^®

•ater in his testimony Pak said he did not think the Little Angels

id helped bring in the money, but he still could not recall how it

as brought in.)

Pak's explanation for the nearly $1 million used to fund Diplo-
:at National Bank stock purchases in the name of UC members
itewise apparently involved massive transfers of cash from
jjjroad."^

** Subcommittee staff interviews.

"The Currency and Foreign Transactions Reporting Act (Public Law 91-508; 31 U.S.C.

•1-1143) and Treasury Regulations implementing its provisions require reports of certain
< nestic currency transactions and of the import and export of monetary instruments in excess
« :»rtain amounts.

••» Foreign Exchange and Foreign Trade Control Law Oaw No. 228, Dec. 1, 1949, as last
Jlended by Law No. 99, 1968.

" Under the foreign exchange control law of 1961 Qaw No. 933, Dec. 31, 1961, as last amended
I law No. 1920, Mar. 30, 1967), all foreign exchange transactions made by Korean nationals
i i foreign nationals are subject to exchange controls by the Ministry of Finance and the Bank
(iXorea.

"* Master Speaks, July 29, 1974, p. 12; see appendix C-218; see also records of Sun Myung
I on bank accounts at Chase Manhattan Bank, N.Y.

" KI-4, p. 324, testimony of Pak Bo Hi.

'•KI-4, p. 324, testimony of Pak Bo Hi. See also financial records of Unification Church
Ismational, (appendix C-281, 282, and 283), which carry notations next to amounts brought in
i tn overseas suggesting that the money was "divided" among numerous persons.

"See pp. 378-381 of this section for further detail.

338 I

The UCI account maintained at the DNB (and later also at Rigg^
National Bank in Washington, D.C.) was an important depositor
for money brought into the United States.'^® Money collected ii
this account was dispatched to a wide variety of business, churcl :
and personal accounts, usually on orders from Moon or Pak. In on
transfer order in March 1977, Moon sent $100,000 from the UC
account to a bank in Korea; in an accompanying letter, Pak Bo ¥
gave instructions for this money to be put into individual ban
accounts, including over $50,000 to an account maintained by Kii
Won Pil (Kim at the time was a UCI director). 35»

These transfers from the UCI account to various Moon Organize
tion businesses — whose officers and directors overlap with UC an
other nonprofit components of the organization — are discussed els(
where,^*® but it should be noted that the UCI financial record
characterized these businesses as "subsidiaries" of UCI.^*^

There is evidence that Moon Organization facilities, particular!
the KCFF, were used to bring money out of Korea to the Unite, :^
States, specifically by having an individual make a loan to tbitiv
KCFF office in Korea, which was then repaid out of KCFF funds U t\
Washington. Chung II Kwon, former Korean Prime Minister an< ti
later National Assembly Speaker, transferred $40,000 to the Unite; lis
States in 1971 using this technique; ^^^ Lee Kwang Jae, a WashinffP
ton broadcaster, brought in $20,800 in 1975 through the KCFF.=»«
number of "scholarships" awarded by KCFF appeared to have
covers for currency transfers from Korea.^** jjle

sst

Political activities by the Moon Organization

Moon Organization spokesmen, well aware of U.S. restrictions o
political activities by tax-exempt groups, frequently explaineifciai
seemingly political activities in religious terms. Neil Salonen mail
tained before the Subcommittee ***** our feelings regarding th
philosophy and doctrines of Communism are not political feelingfiin
they are spiritual religious feelings * * *."^^ An application of th
religious anti-Communism was the UC^s attitude toward Nort

Korea, which was seen as the purest embodiment of Communism mt
God's chosen nation. South Korea, must therefore triumph over i' ^o
northern adversary. Thus, the UC could assert that U.S. troo^ Jj
must remain in South Korea as a "religious teaching." ^^^

Based on this and similar doctrines. Moon's followers engaged : ^
a wide variety of activities which they would later characterize i ^ '
'religious." Support of Richard Nixon during the impeachmei
proceedings was not political, but rather an effort " * * * to g]
people to think more in terms of turning to God for their answe
to Watergate." ^^^ A Capitol Hill public relations team, organized
develop contacts with Senators and Congressmen, was similar

!cen

»»• See p. 322 of this section.

"• Financial records of Unification Church International; see appendix C-250. Aij

»«> See pp. 322, 382 of this section. "^

»•' Financial records of Unification Church International; see appendix C-283.

»" KI-4 Supplement, pp. 676-678; KI-4, pp. 444-445; Kim Chong Hoon statement.

'" Subcommittee staff interview with Lee Kwang Jae; KI-4, pp. 470-472.

'•* Subcommittee staff interview with Donald MUler.

»•» Testimony of Neil Salonen, SIO executive session, Sept. 30, 1976.

*" Testimony of Neil Salonen, New York City Tax Commission hearings, Jan. 5, 1977, p.

^' Testimony of Dan Fefferman, KI-2, p. 34.

339

laracterized as part of an effort to remind legislators of spiritual
alues.

Demonstrations at the U.N. and elsewhere were portrayed in
!rms of religious opposition to Communism. Even participation by
C members in a Moon Organization fishing business was said to
3 part of their spiritual training because "it requires great pa-
ence and is a test of the mind and body" and because it is "a
iligious experience" symbolic of fishing for the souls of men.^*^
At the same time that Moon Organization spokesmen define
hat constitutes religious activity broadly, they seek to define
hat constitutes political activity narrowly. As described by Dan
Bfferman before the Subcommittee, there are but two types of
:tivities which could properly be labeled political: to attempt to
ifluence pending legislation, and to support a candidate for public
fice. [In fact, these activities are specifically excluded by the
)rporate charter of the UC]

Some observers, however, see goals in the Moon Organization's
^tivities which are clearly political, including those carried on by
le Unification Church. Allen Tate Wood, testified that in his view
16 UC was not a church at all:

It is my contention that it is certainly not a church. It is certainly a political
iganization which clearly has partisan objectives.^"

Another ex-member said that her experience in the church led
3r to believe that Moon intended to make UC members into "a
:tle political army." ^^° The opinion rendered by the New York
IX Commission in denying tax-exemption for certain UC proper-
3S stated:

hough the applicant association does in certain aspects bespeak of a religious
sociation, it is in our opinion so threaded with political motives and activities that
requires us to deny its application.^'*

It is also interesting to note that Moon himself saw danger in
iking politics to his spiritual movement. In relation to the anti-
ommunist ideology. Moon said:

One thing that makes it difficult for us to advance full-stream [sic] is that we
ainot quite proclaim our movement as a church on the foundation of the V.O.C.
ictory Over Communism] ideology ♦ ♦ ♦ We must, at any cost, let the people
ow that Unified Thought, our philosophy, is based on our theological doctrine,
herwise, we cannot connect the V.O.C. movement with our church movement.^'^

In 1974, while preparing his followers for a demonstration at the
.N. against withdrawal of troops from South Korea Moon said:

You must remember that you should not be saying anything in political terms.
)u must say, "We are not concerned about political things. We are not doing this
- political reasons, but out of humanitarian motivation." ="

Similarly, UC members undertaking activities on behalf of Presi-
mt Nixon were to achieve a "political effect caused by a religious
ncern," ^^* while avoiding being pinned down as to the real object
their "Project Watergate" campaign. The members were cau-
Dned:

« Newsweek, Sept. 11, 1978.
« Allen Tate Wood, SIO-II, June 22, 1976, p. 25.
^"* Subcommittee staff interview with a UC member.

" New York City Tax Commission opinion which was being appealed at time of publication.
:'^» Master Speaks, Jan. 30, 1973, p. 4; see appendix C-211.
>" Master Speaks, Oct. 20, 1974, p. 19; see appendix C-222.
"Testimony of Dan Fefferman, KI-2, p. 26.

35-508 O - 78 - 23

the

340 _r:

If necessary, take a more political stance; only do it delicately. No newspaperi ^
accepted the Watergate Declaration as an ad at religious rates.''* |fi

The Subcommittee found substantial evidence indicating that thej f
Moon Organization, through its components, had engaged in politi-
cal activities in the United States not covered by the charters of%I
those organizations. This was true even using the narrower defini-
tion of 'political activity" preferred by Moon Organization spokes-
men.

As noted earlier, former president of the FLF Allen Tate Wood
testified to the political aims of that organization. Wood said
Moon's aim was to make the ROK Government dependent on him,
and thereafter to use similar techniques in other countries:

He wanted President Park to become absolutely dependent on him * * * He| j
would talk about the way we would work in South Korea, the way we would gainij^';
the allegiance of the South Korean Government, and that was a model for winning
control of other countries, the United States included. Very simply, it is the same
plan as that for winning a Congressman or a Senator.^'*

Wood described Moon's technique for achieving political controli§0
and influence:

You make yourself available to serve, and you serve that man with whatever it isJJ ^\ ^
You carry out his orders. You carry out his directives until he trusts you absolutely,i|{pill
wnether it is political work, economic work, or social work. Then finally when your
services have become indispensable, then you begin to dictate policy. If he deviates
from the policy you have set, you withdraw your support, and he is powerless. So he
has no choice but to follow you.

Basically, it is "I am going to serve you to death," approach.'" ji ^ae

In a May 1973 speech. Moon told UC members in the United^ '¥
States "* * * I am not going to send you into the political fieldfff'^^
right away — but later on when we are prepared." ^'^ Although
Moon had laid the foundation for political work in this country *J' J
prior to 1973, his U.S. followers became more openly involved in
political activities in that and subsequent years.

Some of the Moon Organization's political activities in the
United States from the early to mid-1970's are described below. Ad ^^^
will be noted, these activities employed the "I am going to serve* ^j
you" approach described by Wood and were calculated to enhaned P
Moon's political influence in Seoul. , ™i

1 ?r
Activities in support of Nixon ! iptoi

In early November 1973, Joseph Kennedy, a consultant hired by
the Unification Church in connection with the Day of Hope Rally) ^«al
in Atlanta, Ga., expressed to Pak Bo Hi his concern over President! »l
Nixon and Watergate. He also described an essay written by Lin-I I on
coin on the technique of national prayer and fasting in times oi%ei
national crisis.

On November 30, 1973, shortly after Moon returned from a 2-fc
week trip to Korea and Japan, full-page ads appeared in the Newijrs
York Times, the Washington Post, and the San Francisco Chronicle
featuring a photograph of Sun Myung Moon and a bold headline
declaring "America in Crisis; answer to Watergate; Forgive, Love,
Unite." Over the next few months this Watergate statement was

Hi
lie

»" Memorandum of the "Project Watergate Regional Meeting" dated Dec. 29, 1973, reprinted
in KI-2, p. 27. See below for a description of the "Watergate Statement."
"• Allen Tate Wood testimony, SIO-U, June 22, 1976, pp. 39-40.
"' SIO-II, p. 40.
'""Master Speaks" May 17, 1973, p. 13. See appendix C-212.

341

<- lablished in 50 other newspapers. Each State UC center and every
idividual in those centers were instructed by Neil Salonen to send
iegrams to President Nixon, the Washington Post, and the New
ork Times declaring their support of Moon's Watergate state-
.ent.3^» This was paralleled by fasting and prayers. Though Moon

, roclaimed that the campaign was his creation, Kennedy and a

■V ,.rmer member of the UC both told the subcommittee that the
lajority of the ideas contained in the Watergate statement were
ennedy's.

• Reaction from the White House was immediate and favorable,
resident Nixon expressed his appreciation to Moon in a letter
ited December 11, 1973. The National Prayer and Fast Commit-
e, a UC organization created to coordinate activities related to
16 Watergate statement, was invited to attend the national Christ-
las tree lighting ceremony on the evening of December 14, 1973.
he roughly 1,200 UC members who attended quickly turned the
Temony into a support the President rally. They were well-re-
3arsed, having practiced earlier.

John Nidecker, special assistant to President Nixon and Presi-
int Ford, testified that Nixon was furious with the group for
irning a national religious event into a political rally.^®^ However,
hen the same group held a candlelight vigil opposite the White
ouse later that same evening, Nixon greeted Salonen and several
the participants. Rallies for Nixon by UC members acting under
le aegis of Project Watergate and the National Prayer and Fast
ommittee were held in several other U.S. cities, as well. Demon-
rations were held in Tokyo, England, Germany, and Italy as well.
, As a result of these efforts, Kennedy, through Bruce Herschen-

" »n, a White House aide, arranged for Moon to be invited to the
residential prayer breakfast held on February 1, 1974. Later that
ly, Moon met briefly with President Nixon in the White House.^®*
The relationship between the UC and President Nixon had not
ways been so cordial. On February 28, 1972, a demonstration
otesting Nixon's visit to the People's Republic of China was
aged by the FLF and Washington, D.C., UC members.^*^
From July 22 to 25, 1974, 600 UC supporters of the National
rayer and Fast Committee held a 3-day fast on the steps of the
apitol. Each participant wore a poster-sized photograph of a Con-
-essman. Several Congressmen were photographed with the indi-
idual praying and fasting for them and addressed the entire
^oup. Moon was actively involved with this fast, apparently pass-
,ig on such details as which group's name should appear on the
anners and whether the Members of Congress should come out to
le steps or fast participants go to their offices.^®^ At the end of the
smonst ration, a telegram from President Nixon was read to the
isters by Herschenson.

Subcommittee interviews of participants in the fast and internal
C documents indicated that Moon's Watergate activities were

'. imed in large part at stopping Nixon's impeachment and enhanc-

> iig Moon's position. In a July 29, 1974 address to those UC mem-

l'^KI-2, pp. 9-11.

"•KI-5, p. 16.

"> Washington Post, Feb. 15, 1974.

"'Washington Star-News, Feb. 28, 1972. ^. ^ ^^^

"» Memorandum from Judy Green to Neil Salonen, July 17, 1974; see appendix C-239.

342

bers who had participated in the fast the following exchange tooli
place:

Question. Father, what do you think will happen with President Nixon '
Answer. Even if many people label somebody as dying not all of them will die. I
this, dying person, Nixon, is revived, then Reverend Moon's name will be mop
popular and famous, right? He may plan one more fasting campaign during tb
final stage of impeachment proceedings, at the Senators level. * * * In the Senat
forum, if they cannot get more than two-thirds of the vote, impeachment will b
automatically cancelled. So, he is exploring this area right now.'"

Two days later, Moon was even more specific:

* * * Father is planning a final strategy before the impeachment proceedings i
the Senate. * * * We prepared a long time ago through the PR team [see below,
making a friendly relationship with Senators, beginning already a few years agQ
Why? This has been done to prevent a two-thirds vote against Nixon, to save Nixo!
and this nation.'*'

Two former members of the UC told the subcommittee of ;
second purpose of the Watergate activities which had definite polil
ical overtones: to impress the Government of the ROK with th
strength and influence of the UC in the United States.^*** As .
result, the stature of Moon would increase in the eyes of Presideni
Park. An article written by Neil Salonen in the April 21, 197;
edition of ''New Hope News" corroborated this view.

When Father came to the United States, his primary purpose was to do things t
make him influential in Korea. The Day of Hope Tour and especially the rallies i
support of President Nixon, were far more significant due to the impact they had il
Korea rather than their impact here.'*'

The PR team mentioned by Moon in his remarks about Nixo:
was one of the first projects initiated by Moon after his arrival L
the U.S. in December 1971. The team, smaller than originall'
planned,^®^ consisted of a group of young, female UC members wh
were given three tasks: to develop friendships with Congressmen o
members of their staff; to explain the UC and dispel any negativ
views of it; and to insure that the Congressman or staff becam
supporters of the ROK. The last goal, when achieved, would serv
to impress the Korean Government as to Moon's influence in th
United States

When a sufficient friendship had been established, the individui
was invited for dinner at a suite in the Washington Hilton. He c'
she would be shown a film on the UC. Prior to August 1975, th'
team consisted of eight members, headed by the Japanese U
members. After that date, 12 new members (9 women, 3 mei*
joined for what was described as at least a 3-year assignment. Froi
August 1975 until the end of the year, a former member of the P

"♦ Master Speaks, July 29, 1974, p. 15. See appendix C-218.

«« Master Speaks, July 31, 1974, p. 2. See appendix C-219.

»" Subcommittee staff interviews.

"' Document submitted for the record, KI-2, p. 5.

»** In a speech to his followers in December 1971, Moon stated that:

"• • • Master [Moon] will assign 3 young ladies to each Senator * * * To restore the Senate
you first must make the aides your friends, particularly secretaries." (Master Speaks, Dec
1971, p. 9. See appendix C-209.)

In May 1973, Moon again expressed his interest in having Unification Church memlx
develop a close relationship with U.S. Ck)ngressmen: "Master needs many good looking girls— 30
He will assign three girls to one Senator • • • One is for the election, one is to be the diplom
one is for the party. If our girls are superior to the Senators in many ways, then the Senate
will just be taken by our members." (Untitled address on "training plans," May 7, 1973. £
appendix C-231.)

343

earn recalled that approximately five Congressmen and five or six
taff members attended these dinners.^^^

Neil Salonen provided the PR team with a list of guidelines in
une 1974. One of the recommendations was that the PR team:

Distinguish among the projects and organizations which Rev. Moon has founded,
id be aware of which ones a given Member of Congress has supported. In many
ises, support of one does not imply support of all— if they are treated as separate
-ejects, then it will be easier for a member of Congress to unite with us on
tmmon ground. ='»*'

Salonen thus illustrated one of the advantages to the Moon
'rganization of maintaining the facade of separate and independ-
it organizations.

In time, some members of the PR team were able to secure
uployment in congressional offices. In at least some cases, the
[ember of Congress did not know the staffer was part of Moon's
R team.391

On at least one occasion, a member of the PR team visited a
)ngressional office and suggested that the chairman of the sub-
jmmittee and some of its staff were Communist sympathizers,
his was during a Moon Organization campaign to discredit the
ibcommittee's investigation.

It is difficult to assess the degree to which the PR team succeed-
1 in creating influence for Moon in the Congress or obtained
iside knowledge of congressional actions. The subcommittee did
Dt conduct systematic inquiries of Senators, Congressmen, and
leir staffs in this regard. However, it is to be noted that Moon was
)nored at a congressional reception and had his picture taken
^th numerous Senators and Congressmen, and the Moon Organi-
ition used congressional names to enhance its own prestige and to
lise funds.

Anti-Japanese demonstration

During the 1976 hearings, the subcommittee learned that Moon's
llowers had participated in plans for an anti-Japanese demonstra-
on. Information gathered in the course of the investigation con-
? -rmed the roles played by the Moon Organization and the KCIA in
anning this demonstration, which was to have taken place on
sptember 4, 1974.

A declassified summary of U.S. intelligence agency reports de-
ribed the circumstances as follows:

• In September of 1974, anti-Japanese demonstrations were planned in Washington,
■ ■« Angeles, San Francisco, and New York on orders from Seoul. The head of the

ashington KCIA arranged with Moon's group for demonstrations in front of the

panese Embassy and the White House.

The KCIA had used Moon and members of his Unification Church to stage rallies

the United States in support of Korean Government poUcies and aims, and on at

ist one occasion Moon received KCIA funds for that purpose.

Due to State Department objections, the planned anti-Japanese rallies had to be
. lied off at the last minute by the KCIA chief through one of Reverend Moon's
' bordinates. The thousands of dollars already expended on the aborted demonstra-

)n had to be written off to good will.'"

"*» Subcommittee staff interview with a UC member.

"••^ Letter from Neil Salonen to Mitsuko Matsuda, June 4, 1974. See appendix C-238.

••> Subcommittee staff interview with UC member.

'"KI-5, pp. 71-72.

344

Evidence from other sources confirmed that the demonstratioil
had been both planned and canceled by the KCIA, with the activi
cooperation of the Moon Organization.

The demonstration was in relation to the assassination of Presil ,
dent Park's wife by a Korean resident of Japan in 1974,3*^ which| f
along with the Kim Dae Jung kidnapping by the KCIA,^** hai
caused relations between Japan and South Korea to deteriorate
Over a period of several weeks, anti-Japanese demonstrations
sponsored by the Korean Government had been held in SeoulB^
demanding greater cooperation by the Japanese Government in thi^^'
investigation of the assassination.

In early September 1974, President Ford announced a planner '^
visit to Japan, which did not include a stop in Seoul. There wen f
also plans for Japanese Prime Minister Tanaka to visit Washingtoi
in September. These developments were interpreted by the Koreai
Government to mean that the United States was siding with Japai
in its dispute with Korea. In response, the Korean Government ^^''
ordered anti-Japanese demonstrations.

The Seoul headquarters of the KCIA instructed the Washingtoi'
KCIA station to organize an anti-Japanese demonstration in tht|
capitol. Kim Sang Keun, a KCIA officer in Washington at the timej "i\
saw the order from Seoul; he attempted to persuade local Koreajf'^y
residents to stage an anti-Japanese demonstration but was unsuc
cessful. Kim was told later by a fellow KCIA officer, Lim KyuilE
that KCIA headquarters in Seoul had sent subsequent instruction
to cancel all demonstrations. However, American UC members hac
already begun to march to the Japanese Embassy and were in th
area of the Korean Embassy. Lim had to go out and halt th
demonstration.^®* ,

According to Dan Fefferman, secretary-general of FLF in 1974' *
FLF staff had held general discussions about a demonstration prioi* ™
to September 14. The actual decision to hold a demonstration waijj^
finalized on September 12 or 13. It was to begin with a rally a
Dupont Circle, and on September 14, FLF and UC members congre/fP ^^
gated there.^*® The idea of sending a small group to throw eggs a
the Japanese Embassy was also discussed. Chris Elkins, a memb©
of the group which was to carry out the egg-throwing, testified tha
plans were called off at the last minute by Neil Salonen. Salonei
had made a phone call from the FLF office near Dupont Circle ant
afterward told Elkins and the others that Moon had told him th
egging * 'would not be necessary." President Ford had agreed t
make a stop in Korea on his forthcoming trip, and this would sho\
American support for Korea.^*^ No public announcement was madj J
of Ford's plan to stop in Korea until September 21. Thus Elkins ("J
account implies that Salonen — through Moon — had an insid
source for this information.

Elkins and the others who were to engage in the egg-throwini'
were separated from the main body of demonstrators who hai
marched from Dupont Circle to the Korean Embassy. A former Ul

15 1
llff

Do:
'in
f

iBlO

I
»rt,
ii
I,
to
lati

iject
-ek
J J'
att
fpec

i8un,

w
lipt

»»» See "Part B: Review of Korean-American Relations," p. 45.
'•* Ibid., p. 42.

*'*KI-5, p. 71; see also "Part C-III: Executive Branch of Questionable Korea
Activities," p. 151.
>- KI-2, pp. 44-45.
»•' SlO-n, p. 49.

Hie

ill

lin^

"Si

345

lember who took part in this march recalled that while the dem-
nstrators were near the Korean Embassy, someone came out of
le Embassy and spoke to Neil Salonen. Shortly afterwards Sa-
)nen called the demonstration off.^** Salonen, on the other hand,
jstified that he decided on his own to call off the demonstration
hile demonstrators were still gathered at Dupont Circle.^^^

Donald Ranard, head of the Korea desk at the Department of
tate at the time, said he learned in advance of KCIA plans to
rganize an anti-Japanese rally. On September 13, he contacted the
[orean Embassy and advised officials there to call off any such
emonstration. This was less than 24 hours before the demonstra-
on by UC members was called off, an event which took place
lortly after the KCIA sent cancellation orders.

A speech by Moon, made 1 week after the aborted demonstra-
on, contained the following passage alluding to contact between
loon and the Korean Government in connection with this demon-
ration:

On the 12th of September, the Korean Government did something to connect with
e, and without their having done that, the world situation could have been
ought into turmoil and tension again. Centering on our Madison Square Garden
oject, all those things took place, but without your knowing it. Some of you may
ive known that in Washington, D.C. I had planned to have a demonstration and
ive you protest before the Korean Embassy and the Japanese Embassy to arouse
e attention of the people of the United States, but we had to quit that. We were
opped 30 minutes before it was due to begin. In fact, we didn't have to do the
•monstration.*®"

Based upon executive branch reports, testimony by Kim Sang
eun, Donald Ranard, Chris Elkins, and Dan Fefferman, an inter-
ew of a participant in the demonstration, and Moon's own de-
Tiption of the events of September 12-14, the subcommittee con-
uded that Moon — through his organization — acted under the di-
iction of the KCIA on this occasion. The demonstration was de-
gned in part to influence U.S. policy toward Japan and Korea. It
as canceled on orders from the KCIA in response to a State
apartment protest.

Moon Organization participation in election campaigns

The Subcommittee learned of two instances of Moon Organiza-
on involvement in American election campaigns. Chris Elkins
^stifled before the Subcommittee that the FLF actively participat-
i in the election contest between Charles Stephens and Richard
•ttinger in October 1974 on behalf of Stephens."*'^ In the late
}60's, Stephens had founded and partially financed "American
outh for a Just Peace." Both UC and non-UC members participat-
i; two of the three officers were UC members. ^^^ The anti-Commu-
ist philosophy of the AYJP and the FLF had encouraged close ties
etween the two groups. However, in May 1971, the AYJP ran out
f funds and disbanded, and Stephens left Washington, D.C. to
Qter New York politics.

According to Stephens, Dan Fefferman had provided some UC
olunteers for Stephens' 1972 New York State Assembly campaign.

"• Subcommittee staff interview with former UC member.

»»• Testimony of Neil Salonen, SIO Executive Session, Sept. 30, 1976.

♦«> Master Speaks, Sept. 22, 1974, p. 7. See appendix C-221.

«' SIO-II, pp.51-52.

"^ Testimony of Neil Salonen, SIO executive session, Sept. 30, 197b.

346

In 1974, Stephens asked Salonen for volunteer campaign workei
for his congressional campaign. Stephens said that Salonen fin
checked with Moon, then provided four workers from the FLI
Fefferman himself played no role in the 1974 campaign. In h
"Reponse to the testimony of Chris Elkins,*' Salonen explaine
that:

• * * If some members voluntarily wanted to work for Mr. Stephens they we
free to do so as they pleased. Mr. Stephens was a personal friend of some of the Fl
staff and he certainly could have asked them for help. They then could take a lea'
of absence from the FLF where they worked as volunteers, and join his campaign
private citizens.***'

This statement obscured Salonen's own role in providing volun
teers for the Stephens campaign, which he did after checking witj
Moon and apparently obtaining Moon's approval.

In his testimony of September 27, 1976, Elkins also described tl
participation of the New Hampshire Unification Church in tli
1974 senatorial campaign of Louis Wyman.*°* Both the candidal
and his campaign manager, Norman Packard, recalled the assia,
ance of Michael Smith, head of the New Hampshire UC members
In his "Response to the testimony of Chris Elkins," Salonen state"

* * * Mr. Michael Smith, a church leader in New Hampshire had been attendiJ
prayer meetings with Mr. Wyman, who was impressed with the quality of o
dedication and commented that such people would make good staff members

Salonen's statement failed to mention that the New Hampshire U
had helped the Wyman campaign.

Activities at the United Nations

CD!

At the opening of the U.N. General Assembly Session in 1974,
appeared that a North Korean-backed resolution calling for tl
dissolution of the U.N. Command in Korea was likely to succee'
The psychological and political impact on the Republic of KoriJ
would have been considerable. Moon believed that passage of tl
resolution would lead to a withdrawal of U.S. forces and heightc
the probability of a North Korean invasion.*®*

To prevent such events. Moon hoped to sway U.N. delegates I
calling their attention to the difficulties of some 6,000 Japane
wives who had returned to North Korea with their husbands. Fro
October 22 to 29, 1974, approximately 600 UC members fasted
front of the United Nations under the auspices of the "Americj
Committee for Human Rights of Japanese Wives of North Korea
Repatriates."

Moon, in a talk at his headquarters in Tarrytown, N.Y., 2 da
before the fast, emphasized the humanitarian goals of the eve,
and denied any political aims:

The master of the Unification Church, Reverend Moon, having known all (
facts, has endeavored to expose them, and we are now at the culmination of (j
activities. We will reflect it in the U.N. Assembly, and we are going to bring it (
on the scene of the whole world. I am not doing this as a politician with ambiti<
but I am doing this for humanitarian purposes under the will of Grod. That's all

^,% ««Ibid.

^ • *^ SIO-II, p. 52

«» Testimony of Neil Salonen, SIO executive session, Sept. 30, 1976. IK.

*^ Master Speaks, Oct. 20, 1974. See appendix C-222. \W

*«^ Master Speaks, Oct. 20, 1974. See appendix C-222.

347

owever, he indicated an ulterior motive when he cautioned fas-
irs not to speak in political terms.

You must remember that you should not be saying anything in political terms You
list say, "We are not concerned about political things. We are not doing this for
jiitical reasons, but out of humanitarian motivation. Then this is the best chance
j' us to realize multiple goals. Perhaps one of the reporters would stick out the-
1 crophone and ask you if Reverend Moon said anything political to you to encour-
{3 you. Then you can clearly answer that Reverend Moon has always said things
i terms of God's providence and that in the will of God we must do this and that,
H never once has he said things in political terms. We are motivated to do things
1 religious reasons and for humanitarian reasons. That's why we are doing this.
' at is your answer. (Italics added) *°*

A 1975 compilation of lectures given by Ken Sudo during a 120-
(y training session held for UC members also showed a different
]:ture of the fast.

n the United Nations, the propaganda from North Korea is very strong. UN
( agates from all over the world were about to become involved with the North
] rean delegates. When we started, we started. And we invited to Belvedere many
( agates from the United Nations. And we fasted for seven days against North
Iraa just in front of the United Nations and we persuaded, persuaded, and per-
£ ided and when we sent the letter, we got victory. Because of all sorts of Unifica-
ti Church members, North Korea was defeated. The United Nations decided to
£ y in South Korea, therefore. Father was very happy to see this victory.

'herefore, the Korean Government is much indebted to the Unification Church.

DC member]: Last year, when we started at the United Nations, there were 21
r ions supporting South Korea and 34 supporting North Korea. And when the vote
([le up, there were 61 nations (which was an increase of 40) supporting South
Iraa. Another question that was brought up in the UN was the question of
I fying Korea. Unlike the troop vote, that vote was secret. We wrote a lot of them
{ 1 that came out 48 to 48. They are going to vote again next year. So there are '78
t ions that are neutral. Before next year we've got to change those 78 nations to

port South Korea. So that is our job with the UN.*"*

or at least 1 year before the October 1974 fast and at least until
8, The New World Forum, a Unification Church public relations
ration at the U.N., had been active in contacting U.N. officials,

^ting them to dinner at the Belvedere Mansion in Tarr3rtown,
lY., and, over time, sought to develop positive relationships. Ten
Vj members generally worked for The New World Forum under
t? direction of Kiyoshi Nishi, Choi Sang Ik, and Michael Runyon,
£ hough at times as many as 25 were involved.**"

After the ROK U.N. Observer Mission in New York received a
imber of complaints in 1975 about these lobbying efforts, the
l>rean Ambassador in Washington instructed the head of the
lOLA's Washington station to discuss the situation with Moon or
(ler appropriate UC officials. Within 3 months, this same KCIA
5 ition chief, who had been opposed to Moon, was instructed by the
cector of the KCIA in Seoul to cooperate with Moon because
bon was viewed as a positive factor in building ROK relations
Uh the United States.""

This shift in attitude toward Moon's political activities appeared
t reflect differing perceptions within the ROK Government of
Ix)n's power, influence, and effect on Korean- American relations.
i discussed elsewhere, the Moon Organization had allies within
t3 ROK Government and benefited from a variety of ties to the

"Ibid.

• 120 Day Training Manual, 1975 p. 55. See appendix C-240

° Subcommittee staff interview with former UC member.

' Declassified summaries of U.S. intelligence reports. KI-5, pp.77-78.

348

Government. *^=* However, to the extent that the Moon Organizatiorj
was perceived to be a threat or a poUtical liabiUty, the Koreati
Government tried to dissociate itself from it, as exemplified by th^l
cancellation of the Little Angels' passports in late 1976 and thjj
prosecution of II Hwa officers in 1977. Yet later in 1977, Moos,
Organization representatives appeared in the United States to ne,
gotiate a defense contract, with the apparent knowledge and back
ing of the Korean Government. This inconsistency in the ROF
Government's attitude toward Moon Organization activities paral
leled the experience of others carrying on pro-ROK influence acti\
ities. For example, the Korean Government similarly disavowed
any relationship with Tongsun Park when he became controversia
in the United States.

Like Tongsun Park, Moon attempted to create a favorable imagi
in Seoul. The activities of his followers were planned for thei^
public relations value and their potential for increasing his politii
cal power in Korea and in other countries as well.

Moon use of prominent Americans

To create an image of power and respectability. Moon mad
skillful use of his meetings with prominent persons and used theii
fame to enhance his own. One witness described how in 1965 Moo)(
had maneuvered, through Yang You Chan, a former Korean An
bassador, to arrange a meeting with President Dwight D. Eiser|mi
hower. Moon remarked later that Eisenhower had ^'paid his bill i
full," meaning "that Eisenhower had opened all the doors for Sui
Myung Moon. ' As a result. Moon "would be recognized by natiom
and international leaders."**^

During the 1973-74 Day of Hope tour. Moon's followers solicite
endorsements and congratulatory messages from political anj J i
church leaders around the United States at the Federal, State, an
local levels. Moon commented to his followers on the significance <
this effort:

itril

If
itrit

This initial effort was well rewarded when I began the Day of Hope tour. As ycfti
jy have sent many telegrams and congratulatory messages. In doing thi 1,
they are lending us the entire weight of their names. * * * This will lift oi

know, they have sent many telegrams and congratulatory messages. In doin;
they are lending us the entir
movement up to the pinnacle.*"

Moon explained how obtaining endorsements from a few pro
nent persons made it easier to obtain others:

When you go get the proclamations in your various cities and you meet tJ
Mayors, it is easy, because your foundation has been laid. All you have to do is shd

)le '

lelei

koi
i
cosi

other proclamations, other letters, and say what other people have done to hon<j ^

Father.*" I \^^

Moon's apparent acceptance by American political leaders, coi< ttor

pled with his ability to turn out hundreds of disciplined followejj io

for rallies and demonstrations, were assets enabling him to solidil tic

his and his organization's ties with the Government. ^ii^

Activities of the Korean American Political Association

In a speech on December 27, 1971, Moon stated that he intendei ^tio
"to make an Asian-American political association" as part of hi ii,,

♦"See p. 351-372 of this section.

*" Testimony of Larry Mays, KI-4, p. 602.

"* Master Speaks, Mar. 24, 1974, p. 9. See appendix C-215.

*» Ibid.

349

fort to strengthen the anti-Communist movements in the United

ates.'*'« Moon also suggested in the same speech that money was
be raised by the Moon Organization to finance this political

sociation. At about this time, an organization fitting Moon's de-

ription, the Korean American Political Association (KAPA), was

dng set up, financed in part by members of the Moon Organiza-

)n.

KAPA had been started in December 1970 by Kim Yong Baik
iter consultations with Kim Doo Whan, the Consul at the Korean
onsulate in San Francisco. Consul Kim introduced Kim Yong

ilk to Choi Sang Ik, head of the International Re-education Foun-
( ition, another part of the Moon organization. Consul Kim suggest-
< Choi as a possible president and potential source of funds for
JA.PA. Choi accepted the position and agreed to provide financial
I pport. After Consul Kim retired from the Korean foreign service,
] became KAPA vice president; in 1975 he succeeded Choi as
jesident. Branch chapters of KAPA were established in 10 other
i nerican cities.

The stated purpose of KAPA was to organize Korean Americans
i d Korean residents into a nationwide organization designed to
( courage their political participation and represent their interests
i U.S. politics. The organizers of KAPA hoped to mobilize Korean
cmmunities to help elect political candidates through financial
(itributions and active participation in their campaigns. The
Haws call for the appointment of a KAPA lobbyist in Washing-
1i, D.C., to serve the interests of the Korean minority. ^^^ Federal
i:ome tax returns indicate that initial funding in 1971 came from
citributions by two individuals, Choi Sang Ik ($19,166.16) and Lee
Ival Woong ($10,000). Lee was a consul at the ROK consulate in
Is Angeles from late 1968 through November 1971. According to
Je, he was asked by Consul Kim Doo Whan to raise funds for
9^PA and succeeded in securing a $10,000 contribution from Los
/igeles businessman Kim Joong Chung, which Lee passed along to
KPA.*^® In addition, KAPA received loans from private individ-
ils affiliated with the International Re-education Foundation in
in Francisco and from the foundation itself.

/According to KAPA records, it received approximately $1,500 per
nnth from Choi Sang Ik between 1972 and 1975 to offset operat-
ic costs. From 1975 to 1977, Cho Woo Euk Man, another Moon
c^anization figure who lives in Hawaii, assumed responsibility for
Use monthly payments and became chairman of the board of
cectors. In all, Cho Woo contributed over $26,000 to KAPA. Other
siall contributions to KAPA were made by private individuals
priodically during its lifetime. For example. Park Tongsun told
U subcommittee he gave KAPA $500.

The principal activity of KAPA in its first year of operation was
t? inaugural convention on December 11, 1971, held at the Re-
education Association in San Francisco. Former Congressman Rich-
£l Hanna told the subcommittee that he was asked by Pak Bo Hi,

•Master Speaks, Dec. 27, 1971, p. 10. See appendix C-207. . ... t^. «n.

' This description is based on staff interviews with Kim Yong Baik and Kim Du Whan and
0 <APA documents in the possession of the subcommittee.
' Staff interview with Lee Hwal Woong on Oct. 23, 1978.

350

an associate of Sun Myung Moon, to be the guest speaker at th<|
convention.*^®

KAPA activities included supporting the campaigns of variomj
National and State politicians. On several occasions, KAPA dona1|
ed funds to these campaigns. In 1974, it contributed $5,000 to th
gubernatorial campaign of Edmund G. Brown. After the campaign
Mayor Alioto offered KAPA the opportunity to suggest the nama
of members of the Korean community to be considered for thi
position of city commissioner. Before suggesting anyone, Choi San
Ik, KAPA president, wrote to the ROK Consul General of Sai
Francisco on January 24, 1972, and asked for his recommendationjj
The Consul General, declined to make any.

A number of incidents in 1972 indicated that some KAPA leaden
attempted to use the organization to promote the policies of tb
ROK Government within the United States. While in Seoul i
1972, Kim Yong Baik, the Secretary General, drafted a letter to th,
director of the KCIA in which he stated that KAPA intended t
contribute to the ROK by forming a union of the 100,000 Koreac
in the United States. He asked the director's immediate attentioi
in order to help realize **a more intimate bond between KAPA an
the Government of the motherland." He proposed that KAPi
would conduct anti-Communist educational activities and wor,
against the invitation of North Korea to the U.N. Noting thjj
KAPA members who were U.S. citizens could easily contact mei^
bers of the House and Senate and give them a new understandinll,
of Korea, he proposed giving KAPA leaders diplomatic training i
the Korean Foreign Service Institute. He implied that KAP
would promote the interests of the Korean Government in choosiii
which Presidential candidate to support. He also stated that KAP
would foster patriotism for the ROK among young Korean Amei
cans by teaching Korean language and history.*=*° In the end ]
told the subcommittee, although he drafted this letter he thoug
better of it and did not send it.

Later that same year, Kim drafted a letter to President Pai
Chung Hee, praising Park's achievements and repeating many
the proposals he had included in his earlier draft letter to tl ™
KCIA director. In an enclosure to the letter, Kim wrote that 1'
had been inspired to organize KAPA in 1969 when, after meetii
with President Park in San Francisco, he realized that Koreg'
residents' associations were not able to carry out the politicj ^^
policy of the ROK Government. Kim suggested that KAPA be tl'
American counterpart of "Mindan," the pro-Government, Koret
resident organization in Japan. Further, Kim asked for anti-Coi^
munist training in Korea for KAPA members and financial sii
port for £in anti-Communist movement in the United States. Ki
also expressed the hope of KAPA — which he claimed representr
all Korean Americans — that President Park would be reelected ii
the next elections, scheduled for 1975.**^ As with the earlier lett^
Kim decided not to send it.

The Presidential election was not held because of the establis
ment of the Yushin system in October 1972. The Yushin declaij ^

*»» Subcommittee staff interview with Richard Hanna; see appendix C-303 for a copy of
KAPA inaugural convention program.
♦*» See appendix C-304.
«" See appendix C-305.

351 ^

)n provoked controversy in the Korean community in the United
lates. KAPA leaders, including Choi Sang Ik and Kim Yong Baik,
;ted quickly to release a resolution expressing full support of
iirk's Yushin measures in the name of KAPA members. Explain-
■:g this decision in a newspaper interview, Choi said the resolution

is adopted because the reunification of Korea required the estab-
];hment of a strong domestic political system.**^ This controversial
jtion contributed to dissension within KLAPA and in the Korean
immunity.

Also in 1972, KAPA organized a trip to Korea for its leaders to
1 partially financed by the Korean Government. According to the
Itter from Kim Yong Baik inviting members to join the trip, they
^)uld meet President Park and other high officials.

Because of its controversial support of the Government and the
ilationship with the Unification Church, KAPA did not succeed in
ttablishing a broad basis of support in the Korean community and
lis been inactive since 1977.

; es with the ROK Government, agencies, and officials

The Moon organization's willingness to conduct a demonstration
{ the Japanese Embassy for the KCIA is one illustration of its
ivolvement with the ROK Government. The subcommittee found
(tensive, additional evidence of operational ties between the Moon
(ganization and the ROK Government, its agencies, and officials.
Sese ties are far more complex and intimate than either the
])rean Government or the Moon Organization has admitted pub-
lly. They have resulted in Moon Organization policies and activi-
t'S which:

(1) were carried out under the direction and control of ROK
agencies and officials;

(2) were coordinated with Korean agencies and officials;

(3) were carried out with the intention of affecting Korean-
American relations.

In investigating ROK Government-Moon Organization ties, the
ti.bcommittee used executive branch reports to provide leads and a
fiimework within which to analyze information collected from
(her sources. Insofar as possible, attempts were made to verify or
ifute information found in the reports. The subcommittee deter-
lined that major portions of the reports were substantiated by
(her information and evidence.

As discussed elsewhere,*" Moon's goals go beyond serving the
iterests of the Korean Government and include gaining control
(er secular institutions in the United States and other countries.
] a 1977 speech. Moon himself commented on allegations that he
^18 a KCIA agent:

vly life is not so small that I would act as a KCIA agent. My eyes and goal are
1^ just for Korea. America is the goal; the world is my goal and target.*"

However, an important part of Moon's overall strategy— as ex-
lessed in his own words— is to bring his organization into close
(ntact with the Korean Government. There is evidence that in

'" "Hankook Ilbo," Los Angeles edition, Jan. 23, 1975; see appendix O306 for a copy of the
solution.

-^See pp. 313-316 of this section.
" Master Speaks, Feb. 23, 1977, p. 11; see appendix C-227.

352

following this strategy, Moon and his organization frequentl
submit to the direction and control of, and coordinate their activ
ties with. Government agencies and officials.

The Moon Organization's actions on behalf of the ROK Goveri
ment are sometimes done at apparent risk to the Moon mov«
ment's own goals and image and have to be explained to U
members. This was true with respect to the planned demonstratio
at the Japanese Embassy, for example, which was both begun anl
halted in response to orders from KCIA headquarters in Seoul
Moon saw risks in mobilizing his organization to support tk\
Korean position on this occasion, but justified it in terms of servici
to Korea:

I ordered my organization to do certain things. I told the leaders that, because
this particular action maybe the Unification Church movement will suffer a sc
back. But, even though we suffer a setback, we must mobilize our forces to uni
behind Korea in the critical moment. We must support the position of Korea.

On other occasions, the Moon Organization has undertaken acti
ities of service to the Korean Government, or as its agent, whic
were also of clear economic or political benefit to the organizati
and did not present as much risk of public opposition. An examp
was the unpublicized effort by Tong II Industries to negotiate a
extension of the M-16 coproduction agreement between Colt Indu
tries and the ROK Government and to obtain Colt's agreement
allow exports of M-16's to third countries.*^** Other examples ar^
the joint Moon Organization-ROK Government support and spoj
sorship of the Little Angels **^ and many of the Moon Organizj
tion's anti-Communist activities. As part of its Victory over Coij
munism program, for example, the Moon Organization establishtj
an anti-Communist training center at Sootaek-Ri, near Seoul. Heii
anti-Communist indoctrination courses were given to Korean Go^
ernment officials.**®

The Moon Organization was affected by shifts among varioi
factions within the Korean Government; this paralleled the expei^
ence of other individuals and groups engaged in pro-ROK activiti(
Tongsun Park, for example, was bitterly opposed by the Korejj
Ambassador to the U.S. and others in the Korean Government, b
he and his supporters in the Government prevailed. As noted earj
er, it was reported that the KCIA station chief in Washington hr
opposed the Moon Organization over the U.N. activities, but tl
KCIA director in Seoul ordered him to cease his opposition ai
cooperate with Moon. Other reports stated that Moon's alii
within the Ministry of National Defense had, by 1976, helped ma,
a Moon Organization industry a leading defense contractor. ,

However, later in 1976 and in early 1977, when there was mu
negative publicity surrounding Moon and his possible connection
the Korean lobbying activities, the Government apparently react i
by canceling the passports of the Little Angels and by charging
Hwa officers with tax evasion. These actions were later cited

"* Master Speaks, Sept. 15, 1974, p. 6; see appendix C-220. See also KI-2, p. 91.
"6See "ROK Defense Production and Military Self-Sufficiency" in Part C-1: "Security £
Political Affairs," pp. 76-78.

♦"See pp. 359-361 of this section.
«*«SIO-n, p. 32-33.

353

tOK and Moon Organization spokesmen as proof that there was no
Dnnection between Moon and the Government.^^s

In numerous speeches and internal publications, Moon and his
)p lieutenants have claimed to have close ties with the Korean
fovernment. In a typical passage, Moon said in a 1974 speech:

In this world of chaos, the Korean government is more on our side, begging for
ir opinion and actions. * * * Korea is strongly on my side, the Korean government

in favor of our movement • ♦ ♦ 430

The following year Moon told a crowd at a rally that President
ark Chung Hee was sent by God:

God set up a powerful new leader, the present president of this Korea, and the
?w order in our society when this country was confused and facing the crisis of
ommunist invasion from the North in 1961! *'^

Early relations with the Korean Government

Moon's relations with ROK Governments prior to the 1961 coup
ere not as mutually supportive as his relationship with that of
ark Chung Hee; later Moon speeches often referred to the perse-
ition suffered in the pre- 1961 period. In 1955, Moon and several
llowers, including Kim Won Pil, were arrested by the South
orean authorities. The actual charges varied depending on the
)urce. One document gave the charge as a "violation of the mili-
iry draft law." "2 xhe Korean National Police said in 1976 that it
as for "pseudo-religion and forgery of official documents." "^^ A
ajor Korean newspaper, the Tong A Ilbo, reported the charge as
/iolation of the military draft law" and "false imprisonment" (the
tier charge stemmed from a complaint by a coed that she had
ien held against her will for 3 days and compelled to adopt a new
'ligion).'*^'* All sources agreed that the charge or charges were
smissed.

This arrest, and newspaper reports of unorthodox "cult" prac-
ces by Moon and his followers, heavily influenced the average
orean's perception of Moon and his movement in the 1950's and
)60's, to the extent that it was recognized at all. Even in later
iars, when Moon and the UC were receiving a great deal of media
:tention, the UC as a mass religious movement was far less suc-
issful in Korea than it was in Japan and elsewhere.
On May 15, 1961, 1 day before the military coup which brought
16 Park Government to power. Moon performed a wedding cere-
lony for 36 couples. Moon recalled that day in a speech:

Even on the very day of the 36 couple blessing, not only parents but the govern-
ent too wanted to investigate our church. In order to not discourage the members,
lad to go secretly to the police station to testify on the very day that I was to bless
e couples."*

TKe subcommittee was unable to obtain details regarding the
overnment's detention of Moon at that time.

'" See, for example, testimony of Pak Bo Hi, KI-4, p. 168.

""Master Speaks, Sept. 22, 1974, p. 6; KI-2, p. 101; see appendix C-221.

"* Master Speaks, June 7, 1975, p. 6; see appendix C-226.

'« Testimony of Pak Bo Hi, KI-4, p. 207.

'"Executive branch investigative report dated May 11, 1976.

'=•♦ "Tong-A Ilbo," July 16, 1955.

'" Master Speaks, Feb. 23, 1977, p. 14; see appendix C-227.

354

Relations with the Park Government

In the late 1950's, Moon's message was favorably received by fou:
young, English-speaking Korean Army officers, all of whom wen
later to provide important contacts with the post-1961 Korean Gov
ernment. One was Pak Bo Hi, who had joined the ROK Army ii
1950."* Han Sang Keuk (aka Bud Han), a follower of Moon's sino
the late 1950's, became a personal assistant to Kim Jong Pil, tb
architect of the 1961 coup and founder of the KCIA. Kim Sang Ii
(Steve Kim) retired from the ROK Army in May 1961, joined thi
KCIA and became an interpreter for Kim Jong Pil. He continue
as a close personal aide to Kim Jong Pil until 1966. At that time
Steve Kim returned to his position as KCIA officer, later to becom
the KCIA's chief of station in Mexico City. He was a close friend c
Pak Bo Hi and a supporter of the UC. The fourth, Han Sang Ki
was a military attache at the ROK Embassy in Washington in th
late 1960's. Executive branch reports also linked him to the KCLHJ
On leaving the service of the ROK Government, Han becami
Moon's personal secretary and tutor to his children.

In the period immediately after the coup, Kim Jong Pil founded
the KCIA and supervised the building of a political base for tb!
new regime. A February 1963 unevaluated CIA report stated tha
Kim Jong Pil had "organized" the UC while he was KCIA directoiL
and had been using the UC "as a political tool." *^^ i

UC spokesmen claimed that the February 1963 report could nc r
be accurate, since, as noted earlier. Moon started the UC's prede i ^^
cessor, HSAUWC, in 1954, before Kim Jong Pil came to powej

The term "organized" as used in the report is inaccurate to ti
extent that it is equivalent to "founded" or suggests that Kim Jon
Pil began the Moon movement. However, as described elsewhere
the UC took many forms and names and was constantly undergc
ing organizational changes. Furthermore, there was a great deal c
independent corroboration for the suggestion in this and later ii Oj
telligence reports that Kim Jong Pil and the Moon Organizatio J^
carried on a mutually supportive relationship, as well as for thj|
statement that Kim used the UC for political purposes. |

As the Park regime consolidated its power. Moon found himse! ' <
with well-placed contacts in the new government. As just notec ||(
two ROK Army officers, Steve Kim (Kim Sang In) and Bud Ha ^
(Han Sang Keuk), had been along with Pak Bo Hi, supporters an jo
proselytizers for the UC even before the 1961 coup.'*^* (

Shortly after the coup, these two army officers, both fluent i \^
English, became aides to Kim Jong Pil and, in their capacity s ^
interpreters, became closely associated with other ROK goven ij^
ment officials as well. Bud Han, for example, served as translate ^^
during Park Chung Hee's meeting with President Kennedy in N<
vember 1961. Steve Kim accompanied Kim Jong Pil on a tour (
the United States in 1962, which was arranged by the U.S. Goven
ment. Pak Bo Hi was a Korean embassy escort officer during pai
of Kim's tour.«»

**« His later activities as president of the KCFF and as one of the key figures in the Ma
Organization are on pp. 323n and 364 of this section.
«•"' KI-4 Supplement, p. 458.

"'Confidential subcommittee staff interview; testimony of Pak Bo Hi, KI-4, pp. 433-44
♦"Testimony of Pak Bo Hi, KI-4, pp. 687-696; confidential subcommittee staff intervie-

355

The Subcommittee obtained a copy of Kim Jong Pil's itinerary
for that 1962 trip, which showed that Steve Kim was part of the
entourage which toured the United States, meeting numerous U.S.
officials. While in San Francisco, Kim Jong Pil stayed at the St.
Francis Hotel. There he met secretly with a small group of UC
members, who were among Moon's earliest followers in the United
States. The subcommittee staff spoke to a person present at the
meeting between the UC members and Kim Jong Pil, who recalled
that Kim told UC members he would give their movement political
support in Korea, though he could not afford to do so openly.**^ A
former U.S. official who accompanied Kim during his stay in San
Francisco corroborated the story about the private meeting.**^

In 1963, the UC was registered as an organization with the new
Korean Government. A UC history described how a lower Govern-
ment official tried to prevent the registration, but was later re-
versed:

When we wanted to register with the government, the Ministry of Education
handled registration, and Mr. Moon, the Minister of Education rejected our appli-
cation. We had to fight it. After one week, it was reversed. * * * At that time if his
rejection was not passed, we could not have any religious movement. He was
supposed to reverse. Finally we had registration. May 31, 1963**^

Also in 1963, Pak Bo Hi obtained tax-exempt status for the UC
branch in Virginia, using his position at the Korean Embassy to
obtain a letter from Ambassador (later Prime Minister) Chung II
Kwon attesting to the UC's status as the "recognized Christian
religion in Korea". '**^ Later in 1963 Pak began to work on establish-
ing the KCFF.

Moon Organization and ROK Government use and control of
the KCFF

Ties to Kim Jong Pil and other ROK officials helped the Moon
Organization take control of the KCFF and use it for the mutual
benefit of Moon and the Government. From the early 1960's
through 1978, KCFF served as an important link between the
Moon Organization and the ROK Government.

The earliest U.S. Government reports linking the KCFF with the
Moon Organization were in late 1964 and early 1965,*** when Pak
Bo Hi was in Korea after resigning from the ROK Army in order
to work full-time for the foundation.

One report in December 1964 identified Pak Bo Hi as "the real
leader" of KCFF and correctly predicted that he would soon return
to Washington to work for the foundation. The report noted Bud
Han and Pak's efforts to establish the KCFF, which was to be "the
first step toward organizing Tong-il in Washington." *** In January
1965, another report stated that Kim Jong Pil had been using the
UC "since 1961.*' It also stated that Steve Kim (Kim Jong Pil's

♦*» Confidential subcommittee staff interview.

♦*• Confidential subcommittee staff interview.

♦«» Master Speaks, Dec. 29, 1971, "History of the Unification Church , p. 6; see appendix
C-209

*" Testimony of Pak Bo Hi, KI-4, p. 441; see KI-4, appendix 16, p. 705; Virginia application for
tax exempt status submitted by Pak Bo Hi. ^^ . . . . „

***See generally Part C-II: "Executive Branch Awareness of Questionable Korean Activities,
pp. 118-120.

♦*• KI-4 Supplement, pp. 459-460.

35-508 O - 78 - 24

356

interpreter) was connected with the UC and that Bud Han had
requested help for the UC from a Korean Government official.***

Steve Kim (Kim Sang In) was also close to Pak Bo Hi and the
KCFF as shown by the fact that he was often mentioned in KCFF
correspondence as a person to contact in Seoul to facilitate KCFF
business.**^

Another Kim Jong Pil aide during the early 1960's was Mickey
Kim (Kim Un Yong), who was later a counselor at the Korean
Embassy in Washington. Several references to Mickey Kim were
made in early KCFF correspondence; a March 1964 letter recount-
ed a briefing Pak Bo Hi gave the Korean Ambassador about the
plans for the KCFF. Mickey Kim had been appointed Embassy
Project Officer for cultural activities ''with particular emphasis on
the Freedom Center." *«

The Freedom Center,**^ was a project of Asian People's Anti-
Communist League (APACL) and was promoted and subsidized by
the Korean Government. The manner in which the Freedom
Center came to be adopted as a proposed KCFF project reflected
the foundation's shift from a cultural to an ideological emphasis.

When the first brochure describing the KCFF was prepared in
December 1963, the stated objectives of the KCFF were to support
cultural, educational, and religious activities; the Little Angels was
the only project then contemplated.****

In January 1964, Kim Jong Pil was named first Honorary Chair-
man of KCFF (Pak Bo Hi had supplied Admiral Burke with Kim's
resume, since Admiral Burke did not know an)rthing about Kim).*"
By the spring of 1964, Kim had arranged for the Freedom Center
to become KCFF's primary project. **2 A revised brochure was pre-
pared. Instead of claiming cultural, artistic, religious, and social
welfare activities as the foundation's only activities, it took a
strong anti-Communist line:

Its [KCFF's] primary mission is to tell the American people why, in support of
firmly established Gk>vernment policy, we have drawn a line against further commu-
nist aggression in Asia and have dedicated American lives and treasure to the
unswerving maintenance of this policy.**'

In explaining the KCFF's support of the Freedom Center, the
brochure disclosed that the Korean Government had already pro-
vided $796,231 in subsidies to the project.*'^*

In an April 1965 letter, Pak Bo Hi stated that Kim Jong Pil had
been the one to urge the KCFF to support the Freedom Center as
one of its initial projects.*'*^ The KCFF could not itself afford to
support the Center at that time, but its officers agreed to have it
serve as a repository for American donations.*^^

At the same time that Kim Jong Pil was maneuvering the KCFF
into adopting one of his (and the Korean Government s) projects,
Pak was arranging for KCFF sponsorship of the Little Angels, the

**^Kl-4 Supplement, p. 460.

"' Ibid pp. 260, 276, 373, 375.

•" Ibid. p. 271.

"» Ibid. pp. 384-385.

♦«>Ibid., pp. 224-232.

♦"Ibid., p. 213.

«" Ibid., p. 305.

«" Ibid., p. 298.

"♦Ibid., p. 306.

♦*«Ibid.,p. 380.

♦"Ibid., p. 398.

357

group Moon had started. It was during this period that Pak told
Robert Roland of his plans to use the KCFF and the Little Angels
on behalf of both Rev. Moon and the Korean Government.*"

Between 1965 and 1968, Pak received no salary from the KCFF,
although he worked there full-time and virtually ran it. Pak's work
for the KCFF was made possible: (1) through the quick action of
the Korean Government in granting him a discharge from the
army and allowing him to return to the United States to become a
KCFF officer ("They say it is unprecedented," Pak wrote at the
time);*" and (2) subsidies from UC members, who paid living ex-
penses for him from 1965 to 1968.«9 Korean officials also helped
Pak operate the KCFF by allowing him the use of Government
facilities, arranging entertainment for prospective contributors,
and providing other types of assistance. *^°

In 1964, both Presidents Eisenhower and Truman authorized the
KCFF to list them as honorary presidents. Their names were in
turn used to convince other celebrities to lend their support.*^^

By 1965, KCFF had acquired a large and unwieldy Board of
Directors, albeit one of well-respected Americans and Koreans. In
June 1965 an "executive committee" was established to oversee
KCFF operations.*«2

In July 1965, Roland wrote Admiral Arleigh Burke, then presi-
dent of KCFF, to ask that his name be removed as a director. He
told Burke of Pak's activities on behalf of the UC ^^^ and warned
that Pak intended to use the KCFF for "the financial support and
propagation of the ideology of The Holy Spirit Association and its
leader, Mr. Sun Myung Moon of Seoul, Korea." Roland enclosed
excerpts from an early UC publication. New Age Frontiers, which
indicated that Pak and Jhoon Rhee intended to use the KCFF to
serve Moon.*^

Admiral Burke stated that Roland's letter disturbed him, par-
ticularly the allegation that Pak intended to use the KCFF to
support the UC. He had never heard of Moon or the UC and had
understood Pak to be a Buddhist. Admiral Burke checked with
Yang You Chan, who supported Pak and who also said he believed
Pak to be a Buddhist. As a result of this and other incidents,
Admiral Burke concluded that the KCFF had to be carefully
watched. Since he did not have time to do so, in August 1965 he
submitted his resignation.

Admiral Burke and Robert Roland were the first of a number of
KCFF officers, employees, and directors to resign over allegations
of misuse of the KCFF to serve the interests of Moon.

In 1966, the KCFF launched a new project called "Radio of Free
Asia" (ROFA), which was to broadcast anti-Communist themes to
North Korea, China, and other Communist countries. This project,
like the Freedom Center, was subsidized and to a large degree
controlled by the Korean Government, including the KCIA. As

♦*' See p. 324 of this section.
"''"Kl-4 Supplement, p. 345.
"'Testimony of Pak Bo Hi, KI-4, pp. 270-271.
**> KI-4, Supplement, pp. 345-360.
♦•' Ibid., pp. 258, 286.

♦•'The executive committee functioned as the governing body of the KCFF, smce it was
usually impossible to assemble a quorum of the Board of Directors.
♦« KI-4 Supplement, p. 405.
*^ Ibid., pp. 405-406.

358

with other KCFF projects, the influence of both Kim Jong Pil and
Rev. Moon was present in its establishment and operations.

Lawrence Mays was appointed international chairman of ROFA
on July 14, 1966.^" In August, Mays, Pak Bo Hi, and Yang You
Chan traveled to Korea to inaugurate ROFA. While in Korea,
Mays learned that U.S. Embassy officials there were hostile to the
radio project, in part because of the background of some of the
participants.

Mays said that on his last day in Korea, Pak Bo Hi took him to a
secret meeting at which Moon and a member of the Korean Na-
tional Assembly were present. Moon congratulated Mays on the
radio project and presented him with a pair of silver chopsticks. In
an interview with subcommittee staff. Mays picked Kim Jong Pil's
picture from a series of photographs as the National Assemblyman
who was present at the meeting.***

The first two operations directors named by the KCFF to head
the ROFA office in Seoul were former subordinates of Kim Jong
Pil. The first, Kim Kyong Eup, had been his close aide and inter-
preter in the period immediately following the 1961 coup. KCFF
minutes reflected that he was recommended by the Korean Minis-
ter of Culture and Information."**^ He was replaced in September
1966 by Kim Dong Sung, who had served in the KCIA under Kim
Jong Pil.**«

Executive branch agencies began to report on the KCIA's inter-
est in ROFA even before the commencement of broadcasting on
August 15, 1966. On August 10, 1966, an intelligence report stated
that the KCIA had been given the task of working out a proposal
concerning ROFA.**» In March 1967, another report said of ROFA:

* * * ROK CIA pushed it strongly, behind the scenes. The Seventh (Psywar)
Bureau of ROK CIA monitors the programs and activities of ROFA/'**

The same report stated that ROFA received free use of Korean
Government facilities for its broadcasts and that ROFA was pro-
ceeding with the full knowledge and support of the ROK Govern-
ment.

The executive branch reports stating that the Korean Govern-
ment subsidized and supported ROFA were also corroborated by
evidence gathered in the course of the investigation. In an April
1969 conversation with an American Embassy official, ROFA's Op-
erations Director, Kim Chong Hoon, was reported to have said that
KBS broadcast facilities were provided to ROFA at no cost.'*^^ In a
sworn statement given to subcommittee staff, Kim said he had no
reason to doubt the truth of the statement. However, he said he
was under the impression that at some point after that ROFA did
pay for the facilities.*^^

♦«KI-4 Supplement, p. 636.

"« Sworn statement of Larry Mays, KI-4, pp. 626-627, 634-635.

*" Minutes of the Korean Cultural and Freedom Foundation, July 14, 1966; confidential staff
interviews.

««KI-4 Supplement, pp. 479, 642.

*®^Ibid., p. 461; see also. Part C-II: "Executive Branch Awareness of Questionable Korean
Activities," p. 119.

*"°KI-4 Supplement, p. 462.

*" Ibid., p. 517; sworn statement of Kim Chong Hoon.

"* Sworn statement of Kim Chong Hoon.

359

KCFF audit records supported the statements in executive
branch reports that ROFA broadcasting was done under the super-
vision of the KCIA.*^3

Moon Organization and ROK Government Use of Little
Angels

While the ROFA project went forward under KCIA supervision,
the Little Angels dance troupe was also receiving subsidies and
other forms of support from the Korean Government.*^* At the
same time, the Moon Organization was beginning to use the Little
Angels more openly for its own purposes.

When Moon came to the United States in December 1971, Pak
Bo Hi traveled openly with him, often acting as his interpreter at
public rallies. His ties with Moon, hitherto obscure, became far
more evident. Pak's increasing identification with Moon led Kim
Chong Hoon, for 5 years the director of KCFF's office in Seoul and
head of the ROFA operation there, to resign in 1972. At the time,
he cited the pressure of other business. However, in a sworn state-
ment to subcommittee staff, Kim said that an additional factor in
his resignation was his perception that Pak was "mixing the
church movement with the KCFF activities without being able to
distinguish and draw the lines." He elaborated:

For instance, he cannot be interpreter to Reverend Moon while he is held as the
President of KCFF. I would think it is contrary to the nature of public office that he
was holding as President of KCFF. If KCFF was funded by Reverend Moon, then it
is a different story but the source of funds is not Reverend Moon and it comes from
U.S. public to support Radio Free Asia. Therefore, when he is engaged publicly in
preaching the Unification Movement, then it is — I think in a way it was unethical,
it was not right.*'*

It is also noteworthy that several years earlier Kim had gotten
Pak to agree to an ad in Korean newspapers disclaiming any
connection between the Little Angels and the UC. He explained his
position:

As Vice President of Operations I did not want to get mixed up with the religious
movement and I personally deplored whatever I read in the newspaper about the
Unification Church * * '. I asked him to authorize us to advertise that the Little
Angels have nothing to do with the Unification Church and he authorized it and we
ran an ad in Korea in the paper.*'*

As discussed earlier,*^^ the Little Angels were originally viewed
by Pak Bo Hi as an instrument for spreading Moon's doctrines. The
UC in its early years could not afford to sponsor the group, so
financial and organizational support was provided by the KCFF,
with the assistance of the Korean Government. However, Moon
and Pak always regarded the group as their own, to be exploited by
the Moon Organization and used in its worldwide strategy for
gaining control and influence over social and political institutions.
In January 1973, while outlining a master strategy geared toward
political goals. Moon explained to his followers how his organiza-

♦" KI-4 Supplement, p. 704. . „ „ j ^, t •,.*i

"* For example, Park Chong Kyu, head of the Presidential Protective Force, allowed the Little
Angels to use a Government building rent free; the Korean Government cosponsored a number
of the Little Angel tours.

♦" Sworn statement of Kim Chong Hoon.

"• Ibid.

♦" See p. 324 of this section.

360

tion had used the Little Angels to gain political influence in Japan
and elsewhere:

So, through our Little Angels dancing troupe's successful performance in Japan
we have .laid the foundation to win the embassy personnel stationed in Japan to our
side — and through them we can influence their respective nations.*'*

Moon had ambitious plans for the Little Angels: ^

Sometime in the future Master will have Mr. Kuboki take the Little Angels, as an
international group, on tour of those nations. At first, people will be skeptical about
his purpose, but he is a good speaker and will make a five-to-twenty minute talk at
the beginning of the performance, explaining that he's doing it for the sake of
international good will * * * I have done this with the Little Angels, at the ex-
pense of millions of dollars.

With their record set up in other countries, the Little Angels can be invited to the
premier's mansion, or the palaces of kings and queens, and will be known to the
people of those nations * * * If we pick up 20 or more senators from those nations,
we can organize a strong group. Out of ten nations we can gather some 200 high-
level people. Mr. Kuboki will be able to invite those top-level people to Japan, and
the political groups of Japan will be surprised at what he is doing.*'"

The Little Angels were thus seen by Moon as an instrument by
which his organization could gain access to political figures and
opinion leaders. In the United States and elsewhere, the Little
Angels did attract the attention and endorsement of numerous
political leaders and other prominent persons. Little Angels con-
certs often provided the occasion for Moon and his top followers to
mingle with politicians and have pictures taken; these pictures and
endorsements were later used in Moon Organization literature to
enhance Moon's image as a well-respected figure with powerful
friends.

The grandiose scheme Moon outlined in January 1973 and his
plan to use the Little Angels as part of that scheme were unknown
to many of the officers, directors, and advisers of KCFF, not to
mention the thousands of persons who contributed to it. However,
some KCFF insiders expressed concern over the possible link be-
tween Moon and the Little Angels. Pak told them, however, that
Moon was a friend and supporter of the Little Angels and denied
any link beyond that. On the basis of this reassurance, KCFF's
chairman Charles Fairchild wrote to Daniel Ben Av, the Los Ange-
les impresario who was managing the Little Angels tour, to state
that the KCFF and Little Angels were not connected to Moon or
the UC. Ben Av had been worried that a link with Moon would
damage the otherwise excellent reputation of the Little Angels.*®*

Aware of the risk that Moon's links with the Little Angels would
become a public issue, UC leaders cautioned members in the
United States against emphasizing those links. The Director's
Newsletter for October 17, 1973 contained the following passages
under the heading: "Important Notice Re: Little Angels":

In order to use the Little Angels in the best and wisest way for Our Master, it is
best not to promote the Little Angels beyond what is said at the banquet by Col.
Pak.

If people ask about Little Angels simply say that Rev. Moon was the founding
inspiration behind the formation of the Little Angels and has attentively supported
their growth since their beginning in 1962. If we use the Little Angels to promote

Master Speaks, Jan. 30, 1973, p. 6. See appendix C-211.
Ibid., p. 6.
Confidential subcommittee staff interviews.

361

Our Master and the Church too extensively, Satan vsdll attack by saying that
Reverend Moon is exploiting these children for his own glory * * * *»^

The concerns of those who thought the Little Angels would be
hurt by links to Moon proved justified when, in late 1976, the
Korean Government abruptly canceled the passports of the group.
This was done in apparent reaction to the growing controversy
centering around Moon's movement and his ties to the Govern-
ment.*"

Moon Organization control of the KCFF governing board
By July 1973, both the KCFF and the UC in America had ac-
quired substantial assets and had developed well-organized fund-
raising systems. At a KCFF board of directors meeting on July 6,
1973, Pak Bo Hi proposed "to erect a compact size board of direc-
tors" which would meet to run the foundation in place of the
impractical board of 60 members comprised largely of celebrities
who seldom or never attended a meeting. In effect, Pak's proposal
made the executive committee into the governing body of the foun-
dation. Pak submitted the following names, all of whom were elect-
ed to the new, compact board:

Charles M. Fairchild, chairman of the board; Bo Hi Pak, vice chairman and
president; Jhoon G. Rhee, member; Neil A. Salonen, member; Marin Zuesse,
member; David Martin, member; Edwin Ang, member; Henry Hurt, member; The-
rese Klein, member.*"

Of these persons, Pak, Rhee, and Fairchild had been on the
board for a number of years. Salonen was president of the UC of
America; Ang was also a UC member and was a director and
officer of UC of America; Therese Klein had just been appointed to
a regional position in the UC; and Marin Zuesse and Henry Hurt
served as finamcial and business consultants to the UC.***

Pak's handling of KCFF's finances and the increasingly open ties
between the KCFF and the Moon Organization led to a split within
the foundation in the fall of 1976. It began when KCFF Treasurer
Gisela Rodriguez discovered that a bank account containing chari-
table contributions for the Children's Relief Fund, a recent KCFF
project, had been frozen to create collateral for loans taken by Pak
on his own to finance construction of a Little Angels performing
arts center in Seoul. *«5 Rodriguez notified Donald Miller and
Arthur Ulin, public relations consultants to the KCFF, who in turn
contacted Fairchild. Fairchild conducted an internal audit of the
books and minutes of the foundation and discovered unauthorized
loans taken out by Pak in 1975 and 1976.

Fairchild demanded the resignation of Pak and Judith LeJeune,
Pak's secretary, who had assisted him in his management of
KCFF's finances. At board meetings in November 1976, Pak ad-
mitted to the unauthorized loans, to doctoring the KCFF minute
books so as to reflect board approval, and to using the KCFF
"scholarship and grant program to help friends evade Korean
currency restrictions and get money into the United States. Fair-

♦•' Little Angels statement in Pak Bo Hi testimony, KI-4, p. 424.
♦•* Subcommittee staff interview.

♦" Minutes of the Korean Cultural and Freedom Foundation, July 6, 1973, p. S.
♦"Directors' Newsletter, April 13, 1973, advised Unification Church leaders that questions
about real estate acquisitons should be referred to Zeusse; see appendix C-230.
♦" See pp. 374-376 of this section.

362

child raised questions about the legitimacy of the loans and wheth-
er the KCFF, or the Individual members of the board, would be
liable to Moon or the UC in the event the loans could not be
repaid.*®*

Pak was supported by the UC faction on the board, which urged
ratification of the loans, and brought forward its own lawyer,
Robert Standard. (As noted earlier, Standard, also a UC member,
had more recently worked under Mitsuharu Ishii for One Way
Productions in Los Angeles.)

In the midst of the controversy, Henry Hurt, a board member,
wrote to Pak urging him to remain with the KCFF; the letter
clearly revealed Hurt's conception of KCFF as a subservient arm of
the Moon Organization.*®^

November 18, 1976.

Dear C!olonel Pak: All of the Directors feel that KCFF has drawn within arm's
length of HSA-UWC, because The Leader is the spiritual and tinancial strength,
and you and Judy are the other essential supports.

While not a prophet or a psychic, I expect fiduciary responsibilities relating to
accounting and efficiency of operations and results to be adequately discharged
within a year or two, and then, KCFF to become as strong a Cultural and Relief
arm of HSA-UWC as FLF will be the Educational Arm. Imagine, Church Members
performing every function all around the World! All things will have worked for
GOOD!

A few months ago, Bob Standard was given the task of setting up a World Relief,
nonprofit corporation for the Church. With the new, very close, relationship of
KCFF, you may want to talk with him. In my opinion, he would be a very fine
Board Member, or, perhaps. Officer.
Respectfully yours,

Henry H. Hurt.

With its clear numerical superiority, the Moon faction easily
defeated Fairchild's objections, and by early 1977 all five remaining
non-Moon officers and directors had either resigned or been forced
out. KCFF had been created to serve Reverend Moon, and now
Moon's followers had eliminated from KCFF the last vestiges of
objection to that subservience.

By this time, however, KCFF's projects had effectively come to a
halt. ROFA was formally discontinued in 1975. Children's Relief
Fund was the target of a New York State audit, which found that
2.1 percent of the $1.2 million raised in 1975 was actually spent for
the designated purposes,*^® a violation of New York's standards
governing fundraising by charitable institutions. As a result of this
audit, KCFF lost its tax-exempt status in New York and was
barred from soliciting funds there. The Little Angels, as noted,
could not travel outside Korea after 1976.

Despite the curtailment of these activities, Pak maintained his
office at KCFF headquarters in Washington and continued in 1978
to administer what was left of KCFF's funds.**®^

KCFF ties with ROK Government officials

Beginning with Kim Jong Pil, Korean agencies and officials used,
or attempted to use, the KCFF and its projects in various ways.
Kim Jong Pil's request that the KCFF adopt the APACL-Freedom
Center as a project was already noted earlier, as was the KCIA's

*•* Subcommittee staff interviews.

♦" Letter from Henry Hurt, KI-4, p. 418.

488 Ne^ York State audit report; see appendix C-294.

**• Subcommittee staff interviews.

363

supervision and control over ROFA broadcasting. KCIA director
Kim Hj^ng Wook and the Minister of Culture and Information
helped Pak Bo Hi establish ROFA by arranging for ROFA to use
government facilities. Kim Hyung Wook viewed ROFA as a means
of carrying on work which would otherwise have to be done at the
expense to the Government, at a time when *' * ♦ * the Korean
Government was short of money to do this kind of work. * * * " 490

The KCFF, in turn, had received favors and support from ROK
Government agencies and officials. Already discussed were the free
use of ROK broadcasting facilities for ROFA (which did not involve
an actual outlay of Government funds, but still saved the KCFF
money), and ROK Government support for the Little Angels.

The three Kim Jong Pil aides who were active in the early days
of the KCFF— Bud Han, Steve Kim, and Mickey Kim— all went on
to assume more prominent roles in the Government. Steve Kim
joined the KCIA, where he served for a time as liaison to the U.S.
CIA.^i While KCIA station chief in Mexico City, he made frequent
trips to Washington, and there was reason to believe that Steve
Kim was Tongsun Park's "control officer" in the KCIA."^ Pak Bo
Hi acknowledged having a close friendship with Steve Kim and
said that Kim was an early supporter of the UC.*®^ Kim frequently
assisted the KCFF."* Bud Han was later to become ROK Ambassa-
dor to Norway.*®*

Mickey Kim served as an aide to Park Chong Kyu, head of the
Presidential Protective Force, and also became head of the World
Tae Kwando (Karate) Association. KCFF records revealed a
number of payments to Mickey Kim and his karate association.
KCFF accounting records referred to his being helpful to the KCFF
in unspecified ways.*®* Kim Chong Hoon, ROFA's operations direc-
tor from 1967 to 1972, said Mickey Kim had ''helped a lot."**'

Kim Jong Pil and his aides were not the only ROK officials to
assist the KCFF or to receive favors from it. Yang You Chan, one
of KCFF's founders, was a Korean Government official during most
of the time he was associated with the foundation. Yang was ap-
pointed special adviser to the Korean delegation to the U.N. in
1964, and in subsequent years he served in various special positions
for the ROK Government. During all this time, Yang was serving
as an adviser and executive vice president of the KCFF and later
became chairman of the board. Yang on one occasion instructed a
KCFF officer to draft a speech for President Park of Korea,*®® on
another, he arranged for $2,200 apparently for travel expenses, to
be paid out of KCFF funds for three Korean officials who were on a
trip for the Government.*®* In 1967, KCFF minutes noted that

«•* Testimony of Kim Hyung Wook, KI-1, p. 63.

♦•> See "Part C-II: Intelligence Activities and Plans," p. 100.

**^ "Korean Influence Investigation," Part 2, hearings before the Committee on Standards of
OfRcial Conduct, U.S. House of Representatives, 95th Cong., 2d sess., Apr. 3, 4, 5, 10, 11, 1978,
pp. 12-73.

♦" Testimony of Pak Bo Hi, KI-4, pp. 433-434.

*** Sworn statement of Kim Chong Hoon.

*** Korea Annual, 1975.

♦- KI-4 Supplement, p. 672; KI-4, pp. 491-492.

**'' Sworn statement of Kim Chong Hoon.

»•• KI-4 Supplement, p. 340. _ .^^ .«, x.t .

♦- Exhibits for the record found in testimony of Pak Bo Hi, KI-4, pp. 483, 490-491; KI-4
Supplement, p. 663.

364

Yang was in Korea for the ROK Government upon the invitation
of President Park but would also be doing business for KCFF.=^«>

In January 1970, Yang resigned as KCFF's chairman, shortly
after his letters of December, 1969, to ROFA contributors had been
received by Congressmen, Senators, and other prominent Ameri-
cans. Senator Fulbright, who received one, later charged that it
was part of an ROK lobbying attempt.*"^ Yang's letter of resigna-
tion noted that he was then involved in "many special governmen-
tal missions, such as lobbying for the $50 million special military
assistance to Korea by the U.S. Congress." '°^

Despite his resignation, Yang continued his association with the
KCFF, and KCFF records showed expenses paid to him in later
years.5**^

Pak Bo Hi's own role in the KCFF showed considerable overlap
with his official duties as a Korean military officer. In a November
1964 letter from Seoul, he explained how he obtained a discharge
from the Korean Army in October and the same day assumed the
duties of KCFF's vice president.^®*

In that and other letters from Seoul in November and December
of 1964, Pak also described his contacts with high-ranking Korean
officials such as Chung II Kwon, Park Chong Kyu, and the Minis-
ter of Public Information. He was able to arrange for free use of
Korean facilities to make a film of the Little Angels and enlist the
aid of Korean officials in entertaining wealthy American visitors
who were prospective contributors to the KCFF.^**^

In January 1965, Pak returned to the United States on a diplo-
matic passport. On his visa application, he listed the date of his
retirement from Korean Government service as January 15, 1965,
not October 1964. Pak submitted with his application a letter from
a Korean Embassy official explaining that Pak had been given an
''additional assignment" following his discharge from the army.*°*

Government subsidies and other forms of aid to the Little Angels
continued throughout the 1960's and early 1970's. The Korean Gov-
ernment on occasion cosponsored tours of the Little Angels and
made its facilities available for their use in Korea.**®^ On special j
instructions from the KCIA director, the issuance of passports for I
the Little Angels traveling entourage was expedited.^®® Choice land j
in Seoul was made available for the construction of the performing |
arts center.'***® j

In the fall of 1970, at a time when U.S. executive branch reports \
were describing intensified ROK lobbying efforts and meetings in j
the Blue House to coordinate those efforts, the KCFF undertook
activities which were closely coordinated with Blue House aides.***® i
Beginning in September, "thank you" letters from Park Chung Hee i

*<» KI-4 supplement, p. 650.

^"^ See "Part C-III: Executive Branch Awareness of Questionable Korean Activities," p. 126.

*°* Minutes of Korean Cultural and Freedom Foundation, appendix C-289.

***' See, for example, Korean Cultural and Freedom Foundation financial records, KI-4 Supple-
ment, p. 701.

»»* KI-4 Supplement, p. 345.

»»» Ibid., pp. 346-357.

«»«File on Pak Bo Hi, Immigration and Naturalization Service, published in KI-4, pp. 266,
644-652.

*"^ Minutes of the Korean Cultural and Freedom Foundation; internal auditors' workpapers of
KCFF (see KI-4 Supplement, p. 673); Kl-4, p. 426; statement of Kim Chong Hoon.

»o« Testimony of Kim Hyung Wook, KI-1, pp. 27-28.

*•>• Sworn statement of Kim Chong Hoon.

^">See "Part C-II: Executive Branch Awareness of Questionable Korean Activities," p. 124.

365

were mailed to KCFF supporters and contributors and to numerous
Members of Ck)ngress and their staffs."^ This mailing had been
arranged by Pak Bo Hi in coordination with Park Chong Kyu, head
of the Presidential Protective Force and a participant at the Blue
House meetings. The mailing was seen as a device to enhance
President Park's and the KCFF's prestige and to help raise
funds."=^ Despite Pak's assertion that the letter was merely a "cour-
tesy," unrelated to fundraising, KCFF's auditors classified it as a
"direct mail appeal" expense.*" Some contributions to ROFA were
even received at the Blue House in the months following the letter
from Park. Blue House officials were described as pleased by the
response.***

When the letter from President Park was stopped following com-
plaints from U.S. officials,"* Pak obtained a letter from Senator
Thurmond which said that Department of State officials had as-
sured him (Thurmond) that "courtesy contacts" from heads of for-
eign states were not improper. Pak later used this letter in answer-
ing inquiries about his role in mailing.**^
i Pak later told the FBI that the letters from President Park had
5 been sent out as as result of a decision by the KCFF executive
r committee. However, the subcommittee's investigation revealed
E that this action was taken at Pak's initiative and had not been
c brought before the KCFF board of directors or executive commit-
1 tee."'
I The KCFF also included on its list of activities for the fall of

11970 a "book project." It was to involve the preparation of a
Korean history, with a laudatory section of the career of Park
Chung Hee.**® Park himself worked with Mickey Kim and another
Blue House aide, Han Ki Uk, on this project."^ In early 1971, Pak
and Donald Miller traveled to Seoul, carr5dng a draft of the book.
They were both received by President Park.*^©

Executive branch agencies noted the arrival of Pak and Miller in
connection with this book. One report stated that in February 1971,
Pak Bo Hi and Donald Miller arrived in Seoul "to present the draft
of President Park's biography for approval.""i The report also
quoted Pak as having said he was aware of criticism of the KCFF
and that he "intended to avoid ROKG attempts to use the founda-
tion in the future." Pak found this difficult because he "had to rely
upon the ROKG for support as in recruiting the Little Angels and
the Government officials at times were rather demanding.""2 ^^

In addition to the "book project," there was a "coin project." Pak
and Yang had received permission from Government officials, in-

"• Kl-4, p. 185.

»'* Sworn statement of Kim Chong Hoon; subcommittee staff interviews.
"'KI-4 Supplement, p. 701.
"♦ KI-4 Supplement, p. 703.

•'•testimony of Donald Ranard and William Porter, KI-4, pp. 65, 95-100.
"•KI-4 Supplement, pp. 187-188. „.,.,. ^ t^ ,j **ii

»" KI-4, Supplement pp. 600-601. Staff interviews with Charles Fairchild and Donald Miller.
"• Sworn statement of Kim Chong Hoon, subcommittee staff interview. r u ir-

"»See "Educational, Informational, and Cultural Activities," p. 307, for a discussion oi Han Ki.
Uk's offer of money to a VOA official.
»*• Subcommittee staff interview.
"• KI-4 Supplement, p. 468.
« Ibid., p. 470.

366

eluding the KCIA chief, to mint and sell commemorative coins,
which were considered legal tender in Korea.'*^

Thus various projects and proposed projects of the KCFF were
aided and subsidized in various ways by the Korean Government,
whicli used these projects for its own purposes. At the same time,
the KCFF was serving the purposes of the Moon Organization and
was also being aided and subsidized by Moon, when necessary.

In the course of this mutually beneficial relationship, both the
Government and its officials were also able to benefit personally
from their involvement with the KCFF. Chung II Kwon circum-
vented Korean currency laws through the KCFF, with the coopera-
tion of Pak; '^^^ the Korean Government was able to obtain outside
help for anti-Communist propaganda through ROFA and the Free-
dom Center; and KCFF facilities and personnel were used to en-
hance the prestige of Park Chung Hee and his Government.

Access to key Government figures was in turn used to bolster the
image of the Moon Organization among its own members. In Janu-
ary 1975, Chung II Kwon, then Speaker of the National Assembly,
addressed a banquet in Seoul in honor of Moon. The following
month (February 1975), when Moon performed a mass marriage in
Seoul, a number of UC officials who were in Korea for the festivi-
ties— including Neil Salonen and Dan Fefferman — were received by
Prime Minister Kim Jong Pil. He discussed with them "the need
for ideological education to enlighten people about the dangers of
Communism" and noted that he was ''aware of the work the Unifi-
cation Church is doing in the United States and all over the
world." The contacts with Chung II Kwon and Kim Jong Pil were
duly recorded in a Moon Organization publication.^^s

St,

I'S

Moon Organization and the South Korean defense industry

The expansion of Moon Organization businesses in Korea must
be viewed in the context of the general development of Korea's
economy and in particular its defense industry. ^^^ The subcommit- }
tee learned that the Moon Organization could not have prospered
as it did in Korea without close cooperation and assistance from
the Korean Government. U.S. executive branch agencies reported
that Moon industries received assistance from the Korean Govern-
ment, which favored Moon's businesses for several reasons.

One was their ability to get financing from the UC. In light of j:
that, it was ironic that in 1977, when the Korean Government
accused a number of II Hwa executives with tax evasion, the '
charges stemmed from II Hwa's alleged understating of assets and I
use of the company to fund UC activities.*^^ As has been shown, in .
the Moon Organization assets are freely transferred between busi- \
nesses and nonprofit enterprises. The ROK Government's cancella- ;
tion of Little Angels tours and its prosecution of II Hwa's officials ,
were indirect demonstrations of its power to make or break Moon
Organization enterprises. Significantly, both actions occurred after!

**3 Sworn statement of Kim Chong Hoon.

»« KCFF financial records, KI-4 Supplement, p. 675, KI-4, pp. 444-445; see appendix C-301i
subcommittee staff interview.
"» Way of the World, February 1975, p. 136; see appendix C-241.
"• See "Part C-IV: United States-Korean Economic Relations."
»« Department of State cables re II Hwa Pharmaceutical Co.

367

Moon's link to the Korean Government had become a public issue
in the U.S. Congress and elsewhere.

In the area of defense contracting, Moon's relationship with the
Korean Government remained close, although its exact nature was
shrouded in secrecy. The State Department reports "» showed that
Tong II Industries was designated as a defense contractor by the
ROK Government and as of mid-1976 was involved in the manufac-
ture of the Vulcan gun (an antiaircraft weapon); air guns, which
were used by Korean school children for military training; and the
M-79 grenade launcher, designed to be used in conjunction with
the M-16 rifle, the basic infantry weapon of the Korean Army.

There were a number of press reports linking Tong II to the
production of the M-16. These reports were repeated by persons
interviewed in the course of the investigation, most of whom, how-
ever, had no direct knowledge. As described elsewhere,^^*® the copro-
duction agreement under which South Korea received the right to
produce M-16's designated the Government alone as the sole pro-
ducer of all components of the weapon.

The subcommittee attempted to obtain definitive information
from appropriate intelligence and other executive branch agencies
about Tong Il's role, if any, in M-16 production. The results were
highly unsatisfactory and revealed that, despite this and prior
congressional requests for information on the same subject, no U.S.
Government agency appeared to know whether Tong II was in any
way connected with the production, sale, or distribution of M-16's.

As noted earlier, in a Newsweek interview. Moon was asked
whether his industries in Korea produced armaments for the Gov-
ernment. Moon admitted that they did, but declined to say which
weapons on grounds that the information was classified by the
Korean Government.*^® Withholding details enabled Moon Organi-
zation spokesmen to encourage the belief that Tong II produced
only air rifles and not heavy weaponry. Interviews of ex-UC mem-
bers and others close to the Moon Organization showed that even
Moon's lower-ranking followers were misled in this manner.

Moon's spokesmen specifically denied any role by Moon-related
organizations in M-16 production. Pak Bo Hi released a statement
in which he said that Tong II had nothing to do with production of
the M-16. Under questioning, Pak said he did not know what
military equipment was produced by Tong II and that Tong Il's
President, Moon Sung Kyun (Moon's second cousin), had assured
him that there was no involvement with the rifle.'^^*
' In December 1977, Moon Sung Kyun and another Tong II official
named J. D. Cho met with officials of Colt Industries in Hartford,
Conn., to request their consent to export M-16's manufactured in
Korea. The circumstances of Moon's arrival in Hartford lent cre-
dence to reports of close ties between Moon's businesses and the
Korean Ministry of National Defense."* It was Tong II which re-
sponded to Colt's telex messages, which had been sent to a high-

"*See pp. 326-328, this section. _ ,

»»See "ROK Defense Production and Military Self-Sufficiency" in "Part C-I: Security and
Political Affairs," pp. 76-78, 81, and 83.
»»« Newsweek, June 14, 1976, p. 39.
"' Testimony of Pak Bo Hi, KI-4, pp. 475-477.
"* Colt Industries documents, see appendix C-34-39, 41-45.

368 '

level official in the Korean Ministry of National Defense. On Sep-^
tember 13, 1977, Moon Sung Kyun wrote to Colt Industries:

On this occasion, we are attempting to product [sic] barrel of M-16 rifle and to
export -to countries of South-East Asia of firiendly [sic] nations."'

On November 22, 1977, Tong II cabled Colt, "We need some more
days to send our representative to you, in order to pre-coordinate it
with our government. "*34 Qn November 28, 1977, another Tong II
cable to Colt said: "Our President will visit your company from
12th to 16th December, 1977 to discuss M-16 contract extention
[sic].''"'

During the meeting with Colt officials in December, Moon said
that the Korean Government was aware of the meeting, but would
deny that Tong II was acting on its behalf, if asked.*^*

The subcommittee staff also interviewed a U.S. businessman
who, in 1976, was given a tour of Tong Il's plant near Pusan and
was shown machinery used to make "castings" for the M-16's.
ROK officials told the businessman that Tong II would also be
making parts for the M-60 machinegun.'^? ^ former aide to Tong-
sun Park, Kim Jin Suk, also told subcommittee staff that Tong II (H
was involved in machinegun production. Kim said that Tong II had ('^
been subsidized by the Korean Government when the Korean de- i
fense industry began its build-up in the late 1960's and early it
1970's. His information was based on conversations with high-rank- '
ing Korean Defense Ministry officials. Documents in possession of I
the subcommittee indicated that Kim had been privy to confiden-
tial details about Korean defense production.*^® ^

There was strong evidence that — through Tong II Industries — the ^"^
Moon Organization was involved in the production of M-16's and |™
other weapons. However, at the end of the investigation there were 5
unanswered questions about how Tong II had become involved in jj!
M-16 production. The U.S. Government-approved coproduction j;
agreement was concluded between Colt and the ROK Government, f
which was to be the sole producer of M-16's. A Colt official who ^
supervised the construction of the ROK Government's production •?
facilities for M-16's said that the Government-owned plant was ^
capable of manufacturing all parts of the gun, thereby requiring no f
subcontractors.

With respect to exports of M-16's, Tong Il's attempt to get Colt's ' J
permission was apparently done with ROK Government knowledge ^ ?
and approval, although it was equally apparent that neither the | !
ROK Government nor the Moon Organization wanted to admit /"
Tong Il's involvement or the ROK Government's interest in export- i '}
ing the guns. U.S. policy has consistently opposed such exports. !

As noted elsewhere,**^® the subcommittee received information j
that M-16's and other weapons had been exported or that exports \ L
had been attempted in possible violation of the Arms Export Con-
trol Act. Because of this information and because of the strange ; ^

"' See appendix C-34
*'♦ See appendix C-42.
"» See appendix C-43.

*'• Subcommittee staff interviews. , m

*" Subcommittee staff interview. i 1

*'* Subcommittee staff inter/iew; Interarms documents, see appendix C-46. i 1

"•See "ROK Defense Production and Military Self-Sufficiency" in "Part C-IV: Economic , ) ';
Relations," pp. 76-78, 81, and 83. ' J^

369

ircumstances surrounding Tong Il's communications with Colt, the
ubcommittee has referred its findings to appropriate congression-
1 committees and executive branch agencies, with the request that
tiey press for further details concerning Tong Il's role in arma-
lents production.^*®

Other ties to the ROK Government

In the 1976 KCIA Plan for Operations in the U.S.,"^ the FLF was
lentioned in two places as an organization to be used to achieve
:CIA objectives. In one section of the plan, it was to be used to
3unter activities of pro-North Korean organizations and individ-
als in the United States:

3. Absolute prevention of a 2nd chosorenization *" of the Korean Residents in
merica;

—Increasingly implant operatives in the underground organization of pro-North
id Anti-government Korean residents;

—Detect plans, search out the organization, block and destroy their operations;

—Disintegration of Pro-Northern Puppet organization within the U.S.;

—Utilize anti-communist groups — FLF, AIM, etc."'

he FLF is also mentioned in another section of the plan which
ealt with operations in media circles:

A. Grasp the lineage and movements of Anti-War journalists (Indicate connections

ith the Northern Puppets)

—Manipulate AIM and FLF.

— CoK)rdinate with the USCIA and FBI.

— Utilize Pro-ROK U.S. journalists and correspondents.

The subcommittee investigation showed that the 1976 plan had
3en preceded by other plans for previous years and that many
iitries in it referred to operations already completed or reflected
igoing relationships with organizations and individuals.*** It also
lowed that Kim Yung Hwan, KCIA station chief from 1974 to
)76, was a key promoter of the 1976 plan. Testimony and UC
x^uments showed that there was substantial contact between Kim
ung Hwan and FLF members. One such contact involved a con-
cessional staff trip to Korea to take place in late 1975, at a time
hen the 1976 plan was being formulated. This trip was mentioned
I a section devoted to operations in Congress.***
Anti-Communist activities, whether carried on under the aus-
ices of the FLF, KCFF, or other groups, repeatedly brought Moon
rganization and Korean Government representatives together,
[oon's speeches made it clear that, as with other political and PR
3tions, anti-Communist activities were to help make his organiza-
on indispensable to the Korean Government and influential in
:her countries as well.

One anti-Communist activity ordered by Moon was a 7-day fast
: the U.N., in October 1974, the expressed purpose of which was to
3feat a U.N. resolution calling for removal of U.N. troops from

^^^'See "Conclusions and Recommendations, in 'ROK Defense Production and Military Self-

ifficiency' " in "Part C-1: Security Political Affairs," pp. 86-87.

">See 1976 KCIA Plan for Operations in the United States and KI-3, appendix lb, pp. 114-138.

**» "Chosoren" is the name of a large, well-organized and powerful pro-DPRK Korean residents

30ciation in Japan.

'♦*See KI-3, p. 115; see also appendix C-85.

'**See "Part C-II: Intelligence Activities, and Plans," p. 102.

*** Testimony of Dan Fefferman, KI-2, p. 66; see also "Part C-II: IntelUgence Activities and

ans," p. 106 and the 1976 KCIA Plan for Operations in the United States, KI-3, appendix lb, p.

370

South Korea.**® A leader of the fast was a Japanese woman nam
Fumiko Ikeda. According to Pak Bo Hi, she was later the recipient
of $3,000 in cash from the KCIA. Pak said he received the $3,000 in
$100 bills at his home near Washington sometime in 1975 or 1976
The -money was delivered along with a 6- or 7-page letter from
Yang Doo Wan. Kim Sang Keun, the KCIA officer who delivered
the money and letter, said he had received both through the diplo-
matic pouch, together with instructions to deliver them to Pak.
Kim was not told by his superiors in the KCIA why Pak was
receiving the letter and the money, and he did not read the
letter."^

Pak testified that he waited until his next trip to Korea to
deliver the money to Ikeda. Ikeda was in Japan at the time, accord-
ing to Pak, and traveled to Korea to pick up the money. **« Pak said
the money was payment of "expenses" incurred by Ikeda on a
speaking tour in Korea, where she had spoken at anti-Communist ,
rallies sponsored by the Korean Government. Pak further testified j
that Yang Doo Won had attempted to give Ikeda the money, but j
she refused; Yang then turned to Pak, who persuaded Ikeda to take 1
the money. Pak said he did not know whether Ikeda's expenses
during her speaking tour were originally paid by the UC, or even
what her job was at that time.**®

Pak's testimony about the Ikeda incident was marked by inexpli-
cable lapses of memory and gaps in his knowledge. Pak first identi- j
fled Ikeda as a Japanese UC member whom he had known for
many years. Later, when Ikeda was quoted in the Japanese press
as having denied being a UC member (a denial she later recanted),
Pak testified that he really didn't know whether she was a UC
member or not, but assumed she was because her husband was a
member. Between Pak's first mention of the payment to Ikeda
during his testimony before the subcommittee on March 22, 1978,
and his next appearance on April 11, 1978, Ikeda traveled from
Tokyo to New York where she met with Pak before returning to
Tokyo. Questioned about that meeting, Pak could not recall when
or where the meeting took place and did not know why Ikeda made
the trip to New York or how her expenses were paid.**®

Even if Pak's testimony is accepted on its face, it constitutes anj
admission that KCIA money was used to reimburse a UC member
for services on behalf of the Korean Government and, further, that]
Pak helped the KCIA persuade the woman to take the money. This;'
incident, together with others such as the planned anti-Japanesei
demonstration in 1974, lent additional support to executive branch i
reports that the Moon Organization had been used by the KCIAJ
and other ROK agencies to carry out Korean Government policies:
and had been rewarded by the Government for these efforts.

Pak Bo Hi's testimony before the subcommittee brought to a
head the intense propaganda campaign being conducted by the
Moon Organization against the subcommittee and its chairman.***
This campaign illustrated again the cohesiveness of the Moon Or-,

"« Master Speaks, Oct. 20, 1974, p. 18; see appendix C-222.

"' Testimony of Kim Banff Keun, KI-5. p. 67.

**« Testimony of Pak Bo Hi, KI-4, p. 189.

"» Ibid., pp. 188-191, 217.

"» Ibid., pp. 210-221.

**' See "Part D-V: Intransigence of the Moon Organization," p. 411.

371

ganization, as the economic, political, and other components were
mobilized to work toward a single goal. Moon businesses provided
Japanese TV crews to tape subcommittee hearings, later edited for
use on Korean television and in "documentaries" shown to UC
members. Brochures glorifying Pak Bo Hi were prepared by Moon
printers and distributed to UC members, who were also mobilized
to attend the hearings and to campaign against the subcommittee
chairman in a Senate primary race. Moon newspapers such as
News World and The Rising Tide propagandized against the sub-
committee and cast Pak Bo Hi in a martyr's role. The Capitol Hill
PR team and other UC members at times spread rumors that the
subcommittee chairman and staff members were Communist
agents or sympathizers.^*^

There was reason to believe that parts of the campaign were
coordinated with the Korean Government, which had embarked
upon a similar— though apparently less intense— public relations
effort of its own. As early as May 1977, Clyde Wallace told subcom-
mittee staff that he had been approached by UC members to work
on a story linking the subcommittee chairman to Communism.

i Wallace had previously provided information to the staff about
Moon Organization investment in the DNB. Wallace — who has sev-
3ral criminal convictions — claimed to be a journalist, though it was
uncertain when he entered that field. As of 1977, he ran a business

I called The Spy Shop, which sold electronic listening devices.

In September 1977, Wallace did write an article — using the name

i Walter Riley — in which he accused the subcommittee chairman of
Deing a Russian agent and of adhering to the Communist line. As
?ar as could be determined, no newspaper carried this article until
ate November 1977, when it appeared in News World.**^

Wallace denied he was paid by the Moon Organization or that he
cooperated with it in his numerous attacks on the subcommittee,
ts chairman, and the investigation. He told a staff member that
lis article appeared in News World only after two Korean Govern-
nent officials, whom he did not name, visited his office and noticed
:he unpublished article. The two Koreans took a copy of the article
Arhen they left, and shortly thereafter it appeared in News World,
according to Wallace.''** On December 11, 1977, the day after sub-
committee staff members arrived in Korea on a well-publicized
nvestigative mission, the article was summarized on the front page
}f the Korea Herald, a Korean Government publication.***
', Thus even in 1977 and 1978, when both the Korean Government
md the Moon Organization were disavowing ties with one another,
:here was reason to believe that relations between them were still
)eing carried on, though less openly. As discussed earlier, the Tong
l1 officers who came to the United States in December 1977 to
iiscuss exporting M-16's told Colt representatives that, although
:he Korean Government was aware of Tong Il's discussions with
Dolt, the Government would deny such knowledge if questioned.
The relationship between the Moon Organization and the ROK
government is a dynamic one, changing over time. The Organiza-
ion's close relationship with Kim Jong Pil and the positions held

»" See p. 342 of this section for a discussion of the PR team.
»" News World, November 1977; see appendix C-245.
*** Subcommittee staff interviews.
"» See appendix C-246.

35-508 O - 78 - 25

372

by Steve Kim and Bud Han in the Korean Government provided
continuous access to influential officials, access Moon saw as necea
sary to attain his goals. Favors were granted the Moon Organiza
tion by the Korean Government, and, in return, assistance wa«
provided ROK officials for the furtherance of government policies
or Tor the personal benefit of the individuals involved. _ j

Economic activities

The economics of the Moon Organization are extraordinaril^j
complex. As addressed by the Korean investigation, they fell basiJ
cally into two categories: business enterprises and financial tran»
actions.

Businesses

The role of businesses associated with Moon and the UC
contributed to the controversy surrounding him and his movement]
Numerous press reports have raised the issue of whether the U
and other nonprofit Moon Organizations were actually vehicles foi"
the enhancement of Moon's personal wealth and served to channei' ^
funds to Moon Organization businesses. ] ™

Spokesmen for the Moon Organization have attempted to create ^^
the impression that, to the extent there is a relationship, th^jj
businesses contribute to the religious movement and not the r&l
verse. However, the flow was in fact two ways. For example, wheD: /
a commercial enterprise was beginning, funds were transferred tc!^^
it from the UC directly or indirectly. After it began to prosper, HS^
contributed to the religious or nonprofit side of the Moon Organiza^' '^^
tion. The Moon Organization's economic system provided substam^^"^
tial advantages to its various components. The religious side pro^ ^
vided inexpensive and ready sources of labor; access to largel'J'
amounts of untaxed liquid assets; and a wide-ranging, inexpensive^^
marketing network. The commercial side provided additionial '^
funds, power, and influence. ^^f

The economic advantages of controlling a bloc of consumers were^^i!
also not missed by Moon. In a speech he instructed his followers tc^ '^^
obey his orders so that the movement could become economically j^
powerful: 'i^'

In the future don't buy American products if Master says to buy from somewher* ,
else. If you believe in what he says, you practice it, you will become the wealthiest- i^
people and the wealthiest nations, but not necessarily on earth. Buy from th< I iijli
company he designates in the future. It doesn't matter if it is a small or large item) ,|
Soon that product will be the one manufactured by us. We have to buy that one i
Then the world or universal economy will come to us.'*" ■ |

The investigation of Moon-related businesses shows that they are; |
totally interrelated with noncommercial components of the Moor^ ^j
Organization. There is a pattern of interlocking directors, officers
and stockholders. The interrelationship of the businesses with the
UC and other components of the Moon Organization is made ex ^
plicit in internal UC publications, where there are frequent refer j ..^
ences to the "family" businesses, as they are called. ] ^

There is evidence that the Moon businesses do not always resped^ ^
the laws of the countries in which they operate. Most of the allega- ;^
tions involving the United States are reviewed in the financial

"• Master Speaks, Jan. 2, 1972, p. 103; see appendix C-210.

'Si

373

'ransactions section below; prosecution of II Hwa officers in Korea
las already been discussed.

Financial transactions

The growth and operation of the Moon Organization required
ubstantial sums of money. This was true for both its commercial
ind noncommercial components. From 1973, it does not appear
hat finances were ever a serious problem. Any unit that lacked
dequate capital was always subsidized by some other part of the
rganization; the flow of money among organizations was a charac-
eristic of the Moon Organization. For the most part, officials of the
arious components tried to keep such transactions concealed. In
bis they have been largely successful.

In terms of Moon Organization financial transactions, subcom-
littee staff focused on several issues: (1) Sources of funds; and (2)
ses to which funds were put.

; The subcommittee sought to determine whether the Moon Orga-
ization had violated U.S. currency and tax laws; regulations gov-
ming tax-exempt and nonprofit organizations; and the charters of
16 various components.

Sources of Funds

, The principal sources of Moon Organization funds were proceeds

"om businesses; money raised on behalf of the charitable or non-

rofit U.S. components of the Moon Organization; and funds from

atside the United States, the ultimate source of which was unde-

;rmined.

' UC fundraising teams were capable of raising millions of dollars

year.*'^ Because these sums were raised by hundreds of individ-
ails and sent as cash or money orders to the UC headquarters, it
^ impossible to ascertain the exact amounts involved. However,

le subcommittee interviewed several former UC fundraisers who
lid they each were able to raise approximately $100 a day for the

ational headquarters.

Due to the relative newness of the Moon Organization businesses

the United States, many of them at the time of this report

'instituted a drain on resources rather than an asset. In the future

lis situation may change, and, as in the case of enterprises in
-ipan and Korea, these U.S. counterparts could prove a valuable
i urce of income for the Moon Organization.

As noted earlier, funds were brought into the United States not

ily for the Moon Organization's own benefit, but also as favors to

IK Government officials and others confronted with the ROK's
irict currency control laws.

Use of Funds
Free transfers of money and personnel across international
I'Undaries and back and forth from religious to political or busi-
Jiss activities were extremely important to the Moon Organiza-
l)n. For example. Moon personally directed the early funding of
l^ws World by authorizing large transfers of funds from the UCI
icount. In the 5-month period from November 5, 1976 to April 7,

See p. 318 of this section.

374

1977, Moon directed the transfer of $2,550,000 to the News World||i«
Communications account at Chemical Bank in New York.**®

Other UCI disbursements included $30,000 to a recording studio
owned by Pak Bo Hi«» and transfers to the KCFF office in
SeouL««o

Another use to which the Moon Organization's funds were put
was as collateral for a series of loans negotiated by Pak Bo Hi onilp
behalf on the KCFF. These loans were for construction of a 'Ter-^
forming Arts Center" in Seoul for the Little Angels.*®*

At a meeting on August 20, 1971, the KCFF board of directors!
resolved to explore ways of attracting funds for this purpose. Land
had been acquired at an attractive location in Seoul through thei
efforts of Pak, Yang You Chan, and Kim Chong Hoon, who spokei
to Korean Government officials to obtain the necessary permits to
enable the KCFF to begin construction on the site.*®* W

In early 1974, Pak Bo Hi made inquiries at the Chase Manhattan j I
Bank, where Moon and the UC had accounts, about a loan to the !
KCFF to finance the construction of the center. Pak was turned :
down. In July 1974, he obtained a $250,000 loan from a Los Angeles '^
branch of the Bank of America. Moon provided the collateral forj^'
the loan by pledging funds on deposit in his own name at Chase /
Manhattan.*®^ I^c

In September 1974, Pak revealed the Bank of America loan to'^^'
the KCFF board of directors. The KCFF minutes for September 3,|f^
1974 say that Pak got the board to ratify an additional $250,000 '25'
loan from the Commercial Bank in Seoul, Korea.*®* Both Charles ke
Fairchild and David Martin told subcommittee staff that the loanfit
was ratified on the express condition that Pak take out no further C
loans without advance approval by the board because they did notf'as
think that the KCFF could carry such a heavy debt load. That 3 1
condition did not appear in the minutes, which Fairchild claimed lit
were altered by Pak. iwc

The $250,000 loan from Bank of America was for 1 year. Whenjit(
the bank asked Pak for repayment in full in June 1975, the KCFFil'
was in no position to do so. Pak asked for an extension, which was||p
refused, and Bank of America collected Moon's collateral. Bank of ^ ^
America officers told subcommittee staff that their decision to call j See!
the loan in 1975 reflected second thoughts about making such ais^
loan in the first place, given the uncertain status of KCFF and the^ \[
fact that the loan was for a construction project in Korea. p

Pak then turned to Chase Manhattan and, in a complex series of; '^
transactions, managed to borrow $250,000, again using as collateral \ .,(
additional funds on deposit in Moon's name at Chase. In connection j
with this loan, Pak submitted to the bank ^'corporate resolutions" j ^

' J '^t

*'* Financial records of the Unification Church International. See appendixes C-257, C-261,' i,
and C-263. ' ^1

"» See appendix C-283. J id

»«» See appendix C-250. See also testimony of Pak Bo Hi, KI-4, pp. 281, 494. Other transactions
are discussed on pp. 322-323. ' I

*•* The subcommittee found no evidence to contradict Pak's statements that these funds were i jj]
in fact used in connection with the construction of this facility. However, due to restrictions on j jj|
investigative activity in Korea, the subcommittee was unable to examine records or conduct
interviews which would have verified the disposition of these funds once they reached Korea. * "^

*•* Sworn statement of Kim Chong Hoon. j «|

**' Financial records of components of the Moon Organization from Chase Manhattan Bank |
and Bank of America; appendix C-255 C-256. "I

*^ Minutes of the Korean Cultural and Freedom Foundation; appendix C-291. I *'

375

ittested to by Judith LeJeune as Secretary of the KCFF which
ndicated that the KCFF's board of directors had approved the
oan. This approval had in fact not been given.^^^

Pak used the proceeds of the Chase Manhattan loan to repay
vloon the collateral he lost on the defaulted Bank of America loan
n 1976, KCFF was unable to repay Chase Manhattan for the new
;250,000 loan and interest, and Pak negotiated a 1-year extension,
.r ''rollover." However, when it came due in mid-1977, KCFF was
n no better position to pay than it had been in 1975 or 1976. Chase
inally called the loan and collected Moon's collateral.

Despite KCFF's inability to repay the loans from the Bank of
^erica and Chase Manhattan, Pak proceeded to commit the foun-
ation to additional loans, the purpose of which was again to raise
ands to send to Korea in connection with the performing arts
enter. The next loan was for $250,000 from the Diplomat National
lank in Washington, D.C. Pak had applied for it on December 16,
975, the day after the bank opened. Pak then turned to the Union
;irst Bank in Washington for $400,000. UCI pledged that amount
jS collateral, as indicated in a document of April 28, 1976.=^««
The next loan was from the National Savings & Trust Company,
Iso in Washington, for $390,000. It was taken out in October 1976,
t a time when the activities of Pak, the UC, and the KCFF were
opics of public controversy. Pak used the proceeds to pay off the
(250,000 loan to the Diplomat National Bank and to retire part of
lie $400,000 loan from Union First. The remainder was deposited
1 the KCFF's Little Angels account.

Collateral for the October 1976 National Savings & Trust loan
as a Certificate of Deposit at the Diplomat National Bank; it
ime from funds wired to the United States by the Tokyo branch
f the International Cultural Foundation. Pak testified that he
rranged for this pledge of collateral through Mitsuharu Ishii. As
oted earlier, Ishii was the ICF officer who had also been the head

Tong II Industries in Japan (Toitsu Sangyo); head of Sekai
ippo, the Moon Organization newspaper in Japan, and, more
jcently, head of One Way Productions, a film company with of-
ces in Tokyo and Los Angeles. According to Pak, he was also the
)urce of most of the funds used to purchase stock in the Diplomat
ational Bank in the name of UC members.^^^
Pak testified that in January 1977 he received authorization
om the ICF to treat the $400,000 as a "contribution" to the KCFF
> that it would not have to be repaid.

These loan maneuvers raised the question of whether the funds
edged as coUaterad on Moon's authority were his own or belonged
• the UC or another Moon Organization component. Pak testified
lat the account Moon used as collateral was actually a "Church"
icount, despite appearances to the contrary:

Many people have misunderstanding about Reverend Moon and his wealth. Many

ink he has unlimited private resources, but that is absolutely untrue. He support-

his family by receiving a regular modest salary. Reverend Moon does not even

** Corporate resolutions of the Korean Cultural and Freedom Foundation, see appendix
'263;KI-4, p. 392.

•• Resolution of Unification Church International; see appendix C-271.
•*' Testimony of Pak Bo Hi, KI-4, p. 306ff.

376

own the home he lives in. It is owned by the church. He does not have a savings i-^
account.'** ^ ^1

Pak admitted that Moon had accounts in Chase Manhattan in ; jjs
his own name, but said these accounts were "sort of like informal 1 1
public accounts of our Church": ]

* • * later that account transformed into Unification Church International legal i }
entity. That account became a UCI account. But prior to establishment of UCI, it j ^,
was held in our leader's name in Chase Manhattan.'*' ^

1 1

This ambiguity over actual ownership of assets was characteris- || jji
tic of Moon Organization financial affairs and further indicated to \ ^
the subcommittee the interchangeability of the various components i ^
of the organization. Despite Pak's assertion that the accounts in |i
Chase Manhattan were 'church" accounts all along, bank records ..^[
simply listed the accounts in Moon's name as an individual, with [
no indication that they were church accounts. Moreover, there are ,^
no references in the loan papers to indicate that the collateral was
being put up by the UC rather than by Moon as an individual. The jj
UC, as a corporate entity, maintained separate accounts. J^

Other assets of the Moon Organization were also treated inter- |;
changeably as belonging to Moon or to a corporation subject to his '^j
control. For example, in March 1975, Daikon Ohnuki, Han Sang 'f
Kil, and Melvin C. Orchard, all presenting themselves as assistants
to Moon, met with an officer of Chase Manhattan in New York. [^,
According to the officer, "[t]he object of their visit was to initiate ° l
discussions with the bank on the possibilities of our participation j^
with Moon in investment projects in the U.S." "° The bank officer ^'^

was told that: <?

Reverend Moon has very large holdings in both Korea and Japan in industrial, iMn
manufacturing, mining and other business enterprises and is considering making ^'^'''
similar investments in the United States. They spoke of a figure of $20 million in KOC
liquid funds being available, but were not too clear on whether this was represent^ {§
by Won and/or Yen nonconvertible deposits."^ u

Chase Manhattan did not enter into any business ventures with Ii
the Moon Organization; lack of details on Moon's financial holdings id
was a factor in this decision. ik

In practice it seemed to make little difference whether the assets lisi
of businesses, money on deposit at Chase Manhattan, UCI's ac- p;
counts, and other holdings were ''Moon's" or "church related." Jik
Within the Moon Organization, control was in the hands of Moon ies
and his top lieutenants, regardless of legal niceties, and the funds i
moved freely as required from one or another component. g '^

Diplomat National Bank 5 ^^

The subcommittee's interest in the Diplomat National Bank re- t
suited from an allegation that persons associated with Sun Mynng
Moon and Tongsun Park tried to gain control of the bank. The ~.,
allegation was based on information that the church and employ- , ^
ees of Tongsun Park constituted a controlling interest in the bank
of approximately 64 percent. The subcommittee also sought to de- ^
termine whether the ROK Government was involved; whether 'i
there was collaboration between the Moon Organization and Tong- ; !|
m

5«''KI-4, pp. 341-342. i ''

"» KI-4, p. 342. J

"° Memorandum of a Chase Manhattan Bank officer. J "'

"' Ibid. ' ^^

377

un Park; and whether there were illegal loan transactions be-
ween the bank and the purchasers. It did so by attempting to
iscover the source of the funds used and the reasons for purchas-
ig the stock.

The Diplomat National Bank of Washington, D.C. opened on
)ecember 15, 1975. It was organized by Asian-Americans and other
ersons interested in the Asian-American community; the chair-
lan was Charles Kim, a naturalized American of Korean origin,
aitial authorized capitalization was $2 million."* One of the stipu-
itions contained in the bank^s offering circular was a requirement
y the Controller of the Currency that no individual have an
iterest in more than 5 percent of the total authorized stock; this
ut a limit of $100,000 on individual stock purchases.

During the summer of 1975, when Charles Kim was soliciting
X)ck subscriptions, Jhoon Rhee,"^ a member of the bank's organiz-
ig committee, suggested approaching Pak Bo Hi to invest in the
ank and to find others who might also be interested. Either Pak
r Rhee suggested Moon. Pak arranged a meeting at Moon's resi-
ence in Tarrytown, N.Y., attended by Charles Kim, Jhoon Rhee,
hd Raymond Gilkerson, a businesman with banking experience
hose son-in-law was prominent in the Moon Organization.=^^* Moon
as noncommittal, but later purchased $80,000 of stock — to serve,
3 he said, the Asian-American community.*^*

,In September 1975, Pak Bo Hi himself purchased $75,000 of
jocky pa)dng with a check made possible by cash he had earlier
^posited to his account in a circuitous manner. He also provided
is housekeeper, Kum Hee Kwak, with the cash to purchase
18,100 of stock. Subsequently he provided $738,000 in cash for
lOck purchases by 13 Unification Church members.''^^ Other Moon-
ffiliated persons who purchased stock were Neil Salonen ($30,000),
akeru Kamiyama ($75,000), and Jhoon Rhee ($100,000)."^
: In addition Pak loaned $100,000 to DNB Chairman Charles Kim
;> finance Kim's purchase of stock in the bank. This money was
iso given in cash. Pak also facilitated DNB stock purchases for
isela Rodriguez and Judith LeJeune, employees of the KCFF.

Pak said he had obtained the $100,000 in cash he loaned Charles
im from the ''Unification Church Pension Fund International"
lespite the fact that Kim was not a UC member). Gisela Rodriguez
'>ld the subcommittee staff that Pak had arranged a bank loan for
er investment (he co-signed the bank note) and instructed her to
ay interest on the bank loan by taking money from cash contribu-
ons to KCFF. The loan transaction thus disguised the real source
' the funds, which was KCFF. When Rodriguez sold her stock in
le wake of adverse publicity about the bank's links to Tongsun
ark and the Unification Church, she repaid the balance of the
ank loan and returned the rest of the proceeds of the stock sale to

"» The actual capitalization of the Diplomat National Bank was $2,424,525.
1'" Rhee was an original director of the Unification Church of Virginia and a close fnend of
JcBorHi. See p. 317 of this section, , ^ „, ^^ , ^^.

'"♦Testimony of Pak Bo Hi, KI-4, p. 341 and staff interviews with Jhoon Rhee, Charles Kim,
d Ray Gilkerson.

"» Testimony of Sun Myung Moon before the SEC.

"•Testimony of Pak Bo Hi, KI-4, pp. 305-307. . ^ „ . , • . j •

'" Senator Ted Stevens (R-Alaska) and Representative Richard Ichord (D-Mo.), also invested in
e bank after solicitations by Rhee, apparently because they were both karate students of his.

378

KCFF. Pak told her that Judith LeJeune would have to follow the
same procedure. He treated the repayments as donations to KCFF.

The total of these purchases was about $1.28 million, meaning
that about 53 percent of the bank's actual initial capitalization was
owned by persons affiliated with the Moon Organization.

In the months preceding the investments, leaders of the various
components of the Moon Organization had shown both a frequent
need for substantial banking services and an interest in controlling
a bank. In a speech on February 16, 1975, Moon twice spoke of
establishing a bank. The second time he said:

On the economic front, we are going to earn money through our trade agencies in
many nations, gather the money and make an international bank, so that the '
currency will be freely coming back and forth.''* !

On February 23, 1975, Salonen was quoted talking about the need
to rely on ''outside economic power" such as banks and that Moon
would depart shortly on a trip to East Asia to borrow money. ^^®
In March, Moon's representatives contacted Chase Manhattan
Bank in an attempt to obtain Chase's help in financing business '
investments in the United States.

It was during that same period, a few months prior to the invest-
ments in the Diplomat National Bank, that Pak Bo Hi was having
problems in getting bank financing for the construction of the
Little Angels School and performing arts center in Seoul. j

Sources of DNB funds

The subcommittee was unable to get convincing answers to ques-
tions about the sources of funds for the investments in the bank.
The subcommittee traced the source of Moon's funds for his stocks)
purchase to a time deposit in his name at Chase Manhatttan Bank
which had been set up in January 1974, with deposits
totaling $555,931. This time deposit was closed out at Moon's re-
quest on September 2, 1975. The proceeds were then deposited to a
checking account at Chase in Moon's name and funds for Moon's
purchase ($80,000) were then shifted through two more checking
accounts in his name, also at Chase, before he wrote his check to
DNB for his stock. These funds transfers through four Chase ac-
counts in Moon's name took place within 7 days prior to his pur-
chase of the stock.'^®®

Takeru Kamiyama obtained the money ($75,000) for his stock
purchase came mostly from a loan to him from the Unification
Church in New York. The subcommittee traced the source of those
funds ($70,000) back also to Moon's time deposit. Shortly before his
purchase of stock, Kamiyama opened a checking account in his
own name at Citibank in New York. Four days before his purchase,
Clifford Yasutake, a church official associated in various ways with
managing church finances, endorsed a check for $285,000 from
Moon's checking account at Chase over to a Chemical Bank check-

"« Master Speaks, Feb. 16, 1975, p. 9; see appendix C-224.

*" Notes of an ex-member of the Unification Church on Neil Salonen 's speech.

*»° One means of determining the source of funds for Moon Organization stock purchases that
was adopted by the subcommittee was to examine the eventual disposition of the funds after
some Moon Organization purchasers sold their stock in the bank. In Moon's case, his $80,000
was returned to one of the originating checking accounts at Chase in March 1977, then
immediately transferred by check to the UCI account at DNB. Dispersals from this account are
described in other parts of this section. This transaction illustrates the interconnectedness of
church finances among the different components of the Moon Organization.

379

ing account in the name of the Unification Church, New York The
source of this $285,000 was Moon's time deposit proceeds from
which Moon's own stock purchase funds were derived Two days
before Kamiyama wrote his check for $75,000 to DNB for the stock
purchase, Kamiyama wrote a check to himself from this Unifica-
tion Church, New York checking account and deposited the check
to his newly opened Citibank account. Two days later, he wrote a
check for his stock from this Citibank account.

In effect, both Moon's and Kamiyama's stock purchase money
came from the same source, namely, cash deposits to Moon's time
account at Chase which, though the time deposit was in his name.
Moon has characterized in testimony before the SEC as being
'church funds."

Though the funds came from the same source, the checks pre-
sented by Moon and Kamiyama for their actual stock purchases
:ame from two apparently unrelated checking accounts in their
)wn names. Certain other stock purchases made by Unification
Dhurch members which were arranged by Pak Bo Hi were also

I nade through personal checking accounts in the names of the

\ ;hurch members and were based on deposits of cash to those ac-
;ounts just prior to the actual stock purchase. One couple who
nvested at Pak's suggestion purchased cashier's checks which they
leposited to their checking account less than a week before their

: )urchase. Other church members or persons closely associated with
^ak Bo Hi who wrote checks for their purchases based on infusions

i >f untraceable cash (or cashier's checks drawn on other accounts to
vhich untraceable cash had been deposited) included Kook J. Seuk,
>Jeil Salonen,5»i Pak Bo Hi himself, and David S. C. Kim.
Thoon Rhee's $100,000 investment apparently came from personal
esources.
Pak Bo Hi's explanation of how he obtained almost $1 million for
•ank stock purchases was complex and unconvincing. He testified
hat $90,000 came from a loan from Mitsuharu Ishii. Ishii gave him
he money in cash in New York in November 1974, but he did not
Jiow how Ishii obtained it or brought it into the country. '^^^ Pak
:ept the money at his home for nearly 10 months — for "no particu-
ar reason." *»^ Some days before purchasing the stock, Pak deposit-
d most of the money in his Riggs account — but in three separate
'nstallments, described as follows: On September 3, he bought a
50,000 cashiers check at the National Savings and Trust Co. which
le later deposited in Riggs. On September 5, he bought a $15,000
ashiers check, also at National Savings and Trust, and again
eposited it at Riggs. Finally, he deposited $10,000 in cash directly
ato the Riggs account.

Following these deposits Pak was able to write a check to pay for
lis $75,000 stock purchase."* Pak said there was "no particular
eason" for this circuitous method of transferring the money into
lis account."*

»•• Neil Salonen testified that he borrowed his $30,000 in cash from four individuals (all of

hom were Unification Church members.)

"'Testimony of Pak Bo Hi, KI-4, p. 363.

»" Ibid., pp. 364-365.

"* Ibid., p. 365.

*" Testimony of Pak Bo Hi, KI-4, p. 370.

380

The money used to buy stock in the names of 13 fellow Unifica
tion Church members came from the "Unification Church Pensior
Fund International," according to Pak's testimony. Initially he saic
this fund was begun around 1971 as a result of Moon's order tc
start a "family assistance program" for elder church members.**
Pak delegated responsibility for it to Mitsuharu Ishii in Tokyo
According to Pak, only he, Ishii, and Shimba (Ishii's assistant) hac
any control over the fund, and, so far as he knew, no one else waf
aware of its existence:

It was formally founded in 1971 and assigned to a program officer of our churcl
for the responsibility, and it was named the Unification Church Pension Fum
International. Over a period of years, from around 1971 to 1975, it accumulate(
enough funds so that we were able to consider establishing a good program."

When questioned, Pak was unable to provide much detail. H(
said the fund "generally" was maintained in New York, where i
was founded "generally" in 1971, but that later it was moved t<
Japan. He backed off the statement that the fund was "formall^
founded" by saying it was started "informally and very loosely,^
and that

* • * there was not any legal paper drawn up or any formal kind of meeting oi j f
registration kind — it is not founded as a legal entity at all.*** ^i

Pak further testified that he did not know exactly where the •
fund was kept from 1971 to 1975, whether the fund was ever kepi
in a bank, how much money was in it, or what happened to it

Mr. Fraser [chairman of the subcommittee]. I am having difficulty understand
ing. You say this [the fund] started informally and loosely; that you gave Mr. Ishi
direction to start the fund. You don't seem to know anything about the func
thereafter.

Mr. Pak. No, sir."» lib

Pak testified that the pension fund was built up over a lon§T
period of time from contributions of UC members traveling into thc; ■
United States. He himself had never contributed to it, did not
know of anyone who had, and never actually saw the fund untL
cash was delivered to him for the DNB stock purchases. Pak waf
also uncertain how the fund got its name:

Mr. Fraser. What is the name of the fund, Colonel?
Mr. Pak. If I define that fund, I define as I told you already: Unification Churd
Pension Fund International. 'JkiC

Mr. Fraser. When did that name get attached to it? i 'jj^

Mr. Pak. I have no memory, no recollection. I don't have any idea.**" , sj.|

Pak also had no idea whether there were any written records or^Jel
the fund.

Despite his asserted lack of knowledge, Pak gave the subcommit
tee prepared statements which were widely circulated in Moor H
Organi^tion public relations campaigns that contained the follows ^
ing declaration:

The money for the Unification Pension Fund International comes from the contri
butions of our members; not a penny comes from the Korean Government oi
certainly not from Korean CIA.*"»

\'§\

*»«KI-4, p. 308. I i

^' Ibid., p. 308.

»•» Ibid., p. 310.

»•• Ibid., p. 313.

»*» Ibid., p. 314.

"'Testimony of Pak Bo Hi, KI-4, ibid., p. 310.

381

The subcommittee found Pak's description of the pension fund to
)e implausible on its face.
Pak testified that he received the $738,000 from the fund to loan

0 church members so they could purchase stock. He received the
aoney, mostly in $100 bills, over a period of approximately 1
Qonth, from late August to late September or early October 1975.
t came directly from Mr. Shimba, Ishii's assistant. Pak had drawn
!ip "a list of names of those who would qualify for a loan" and
ontacted each person:

If I remember correctly, I made sure to explain the following to each person:
One, I asked if they would like to obtain a loan in order to invest in a bank. I
xplained that the loan came from Unification Church Pension Fund International,
hich had accumulated for the purposes of helping elder members settle their
imilies. I also explained that the loan would be noninterest and would be repayable
ithin 10 years if the money was available, so it would be there for other members
) use.

Two, I explained that they would be buying the stock as outright owner and they
ad the right to do with the stock as they pleased. They could either keep it or sell
, . whenever they wanted. The purpose of the stock was to help them gain financial
!Curity.^'2

Pak indicated to the SEC that the 10-year repayment period was
ot to be taken seriously:

5 You know in order to make them relax and enjoy the fund benefit coming, I
:plained to them it is almost indefinite thing until you really come up with the
oney to pay back. If it takes ten years or more than ten years, that will be
srfectly all right.

So ten years may not be that clearly registered in their understanding. But it was
e understanding between Mr. Ishii and myself. *"'

The Securities and Exchange Commission and Federal Reserve
oard attempted to question the UC members in whose name
iplomat National Bank stock was purchased with funds provided
/ Pak. Some of these persons could not be located, while others
aimed their fifth amendment privilege and refused to testify,
'hose who did respond did not support Pak's testimony before the
ubcommittee.*^*

Not only was the 10-year period "not clearly registered" in their
:inds, these persons had only a vague idea of the terms under
hich they received funds. One thought he was supposed to return

e money to Pak or the church once the stock was sold. They
:ceived no promissory notes as evidence of any loans, nor was
lere any mention of a "pension fund." None knew the source of
1e funds provided by Pak.

Use of the Diplomat National Bank

The opening of the Diplomat National Bank gave the Moon
tganization the opportunity to exercise great influence — if not
i.tright control — over a newly organized American bank. Bank
(airman Charles Kim told the subcommittee that he was unaware
< Pak Bo Hi's close connection with Moon when they discussed the
J )ck' purchases. However, after the bank opened, he said Pak

1 quested that he segregate a number of proxies. They belonged to
ID members who had bought stock with the money provided by

■i

' Testimony of Pak Bo Hi before Securities, and Exchange Commission, Apr. 18, 1978, P- 142.
Securities and Exchange Commission documents concerning Unification Church members.

382

Pak. Instead of being mailed to the individuals, they would presum- \ lej
ably be delivered by Pak.^^'^ ^ I

The Moon Organization's ability to influence and control the ^ jii
DNB was enhanced by opening the UCI account, which made it one \ \i\
of the single largest depositors.*®^ Pak and Moon denied any inten- j n
tion to control the DNB, and said the decision to move the UCIii
account to Washington was made for other reasons. According toUC
Moon, it was because UCI was located in Washington. *»' However, I
UCI stationery showed its location to be Tarrytown, N.Y.; nor was3)!r
UCI incorporated in Washington until February 1977. 5 i

Whatever the reasons for opening it, the account satisfied one oU-ja
Moon's purposes for wanting to establish an internationgd bankn^l
'*so that the currency will be freely coming back and forth." «««i?al
Over $7 million went into the UCI from December 1975 to March <»i
1977. The money was disbursed largely among other entities in the like
Moon Organization. Pa3mients to News World and the Moon fish-ii*
ing companies alone accounted for over $2,710,000. Other pajonents 0
went for legal fees for Pak Bo Hi, Moon, and other church officials; ^^
a recording studio owned by Pak ($30,000); $200,000 to KCFF's^^er
branch accounts in Korea, including $50,000 to one of UCI's direc- l^J!
tors, Kim Won Pil (also president of II Hwa Pharmaceutical); and ™
payments to other Moon organization business ventures.''*® ^^

In addition to the UCI account, Pak had several KCFF accounts ^
moved to the Diplomat National Bank in early 1976. '^^

Shortly after the bank opened in December 1975, Pak applied for ™
$250,000 in loans, the proceeds of which were to be wired to Korea '°^"
for construction of the performing arts center for the Little Angels. ^
One loan for $100,000 went to Pak himself; it was secured by'^""
shares in ''Grace and Park Corp.," the corporation formed by P^^^^
and his wife to hold title to their real estate (property substantially ^^
encumbered by mortgages). The other loan ($150,000) was for the Li
KCFF and was secured by KCFF accounts at the Diplomat Nation- Ij^,
al Bank — accounts which had been partially funded by the first .„y^
loan.«oo ^l

The loans were initially approved on December 16, the day after q
the bank opened, without a meeting of the loan committee, which ^jjj
was a violation of the bank's own rules. Then, on December 31, thej|,
board of directors approved them at a meeting. The minutes of the ujj
meeting stated that "Mr. Barr's vote would be 'nay' to the Korean ijl
Cultursd and Freedom Foundation loan if Reverend Sun Moon was fj
associated with the group. "*°^ i g

In February 1976, as a result of a routine audit, the U.S. Comp-ii
troUer of the Currency notified the bank that the loans to Pak andc jsj
the KCFF had to be considered as one loan, according to banking
laws. Since the combined total exceeded the bank's lending limit, 1
the loans had to be curtailed by $25,000.«o2 i

*»* Sworn statement of Charles Kim. ]

^^See p. 322 of this section. ,

*»' Testimony of Sun Myung Moon before the Securities and Exchange Commission. '

"• Master Speaks. Feb. 16, 1975, p. 9; see appendix C-224. . ^

*^ Financial records of the Unification Church International, see appendixes C-250, C-283. ,,
•*>o Records of the Diplomat National Bank concerning Pak Bo Hi's loan see for example, i ,.

appendixes, C-252, C-253, C-254. Testimony of Pak Bo Hi, KI-4, pp. 391-392. . ,

•0' Minutes of the Diplomat National Bank, Dec. 31, 1975. See appendix C-253. i .
"2 Letter from the Comptroller of the Currency; see appendix C-252.

383

Pak paid off the loans in late 1976— after public controversy had
egun over his and Moon's role in the stock purchases— but only
fter borrowing the $400,000 from Union First. The collateral for
[lat loan was put up by the International Cultural Foundation in
apan, part of the Moon Organization. Later, when it became
pparent that KCFF would not be able to repay the Union First
)an, the ICF treated the $400,000 collateral as a "donation" to the
[CFF.

In the spring of 1976, media reports had begun to appear con-
3rning Diplomat National Bank stock purchases by Moon and
lurch members. As a result, the bank decided to encourage Moon
nd his followers to sell their stock. Charles Kim conveyed this
3quest to Pak, who was upset.^^^ Moon agreed to sell his stock,
ak to contact church members who owned stock to persuade them
) sell. Pak, however, told Kim he wanted to dictate the order of
le members' sales so as to minimize adverse publicity. ^^'^ There-
ifter, 12 owners tendered their shares back to the bank for resale.
Only six members' shares were eventually resold. The reason
as that the addresses of record at the bank for a number of them
ere invalid by the time of the resale (hence the shares are still
3\d by the bank in their names) and because the bank experienced
ifficulty in reselling the shares. A seventh church member's
lares were partially resold.

The bank issued cashiers checks to those members whose shares
ere resold. These were negotiated in ways which made the funds
fficult to trace. For example, Duk Moon Aum, a long-time church
ember in Korea and the architect for the Little Angels perform-
: g arts center in Seoul, had purchased $50,000 of the stock with
:oney provided by Pak. After talking with Pak and Kim, Aum
J freed to sell his stock. The next day he went to the DNB and
jceived a $50,000 cashiers check from the bank, which he prompt-
] converted to cash (the bank did not report this cash transaction
1 the Treasury, in violation of banking laws and regulations.)®®^
<[i the same day, a Korean businessman named Choi Che Yung
l»ught the shares Aum had sold to the bank. Choi used money he
j't from Yang Doo Won, a high-ranking KCIA official in Seoul.
Choi denied consulting with Yang before buying the stock; Kim
rid he did not know Choi was using KCIA money. However, Kim
<d say that earlier in 1976, during a trip to Korea, he had dis-
rssed the Diplomat National Bank with Yang Doo Won and the
lOIA director, and had later received, letters from them.«<>«
When reports of the UC investment in the bank first became
]iblic, Pak and other church members met to consider ways to
i al with the bad publicity. The subcommittee received conflicting
^ rsions of what was discussed:

(1) Clyde Wallace (also known as Walter Riley) told subcom-
mittee staff that since Moon, Pak Bo Hi, and Neil Salonen
sometimes asked for his advice, he was invited to a meeting at
Pak's office in Washington on June 19, 1976. Also present were
Neil Salonen, Michael Runyon, and Cha Han Joo, a church
leader from Baltimore. Pak expressed concern that the church

■» Testimony of Pak Bo Hi, KI-4, pp. 357-358; sworn statement of Charles Kim,
•* Sworn statement of Charles Kim. « , , ,. ^«- • , ^ ...

" Testimony of Charles Kim before the House Committee on Standards of Official Conduct.
"• Sworn statement of Charles Kim.

lei

384

had brought in large amounts of cash from foreign countries
specifically Japan, Germany, and Korea, for its investment ii
DNB and had used church members as fronts.®^' Wallace sug'
gested the Unification Church make up phony notes to impli
that the money was borrowed.

(2) Neil Salonen testified under oath that he was present a
a meeting during which there was a discussion about fundj
being brought in from abroad for investments in the Diploma
National Bank. He refused to give further details, claiminj
attorney-client privilege because, he said, a lawyer was als<
present at the meeting. «<»«

(3) Pak Bo Hi testified under oath that Wallace had beer
present at a meeting in Pak's office at about the time o
newspaper stories on the bank investments. However, he
denied there had been any discussion about the source of fundf^
for the stock purchases.***^ j

Tongsun Park and the Diplomat National Bank

A total of $250,000 in stock was purchased in the names of three
senior employees of Tongsun Park: $84,000 for Spencer Robbinsi
Park's executive vice president; $83,000 for Dick Staples, Park'j
financial adviser; and $83,000 for Milton Nottingham, Park's ship
ping consultant. They used money Park had "loaned" them.

Tongsun Park told the subcommittee staff that Charles Kin'
suggested in the summer of 1975 that he invest in the bank Kinc
was organizing. Park decided to do so partly out of a desire to help
the young Korean-American businessman, but also because he in-
tended eventually to acquire a controlling interest in the bank
since "Whenever I made any investment at all, I always wanted tc
have a majority position." «^° Kim advised Park that the maximuir
stock purchase for one person was 5 percent, or $100,000. Park,
using his own money, decided to buy his stock through three nomi
nees so as to avoid the limitation. He said, "I was going to maneu
ver later and acquire more and more * * * I was going to own the
Diplomat National Bank by myself." ®^^ He intended to achieve his,
goal by 1981 or 1982. Tongsun Park said he was unaware of anj,
involvement by the ROK Government in the Diplomat National
Bank and that he never discussed the bank with an official of the^
Government. He surmised, however, that it was "highly conceiv^
able" that Kim would have tried to interest the Government in the
bank: Korea "is a country where, if you want to do well, undoubti
edly you should have a blessing from the political sector, especially
people in power * * *." ^^^

Tongsun Park also stated that, at the time of his investment in
the Diplomat National Bank, he was unaware that Rev. Moon andt
followers were also buying stock.

"' Subcommittee staff with interview Clyde Wallace.

«»• Testimony of Neil Salonen, SIO executive session, Sept. 30, 1976. pp. 87-98.

«« Testimony of Pak Bo Hi, KI-4, pp. 337-338.

**° Sworn testimony of Tongsun Park.

•" Ibid.

385

Summary

)\ The Moon Organization directly provided at least $1,078,000 to
.urcnase shares m the Diplomat National Bank's original stock
?^n . T]}^ ^^ ^^^^ ^^ percent of the eventual capitalization of
2,424,525 and represented 43,120 shares. In addition to funds di-
ectly provided, $207,000 worth of stock was purchased by Unifica-
ion Church members or persons with clear ties to the Moon Orga-
ization or persons with family ties to Pak Bo Hi, to whom he
trongly recommended the investment. These funds derived from
rivate sources or from obscure sources which could not be defmi-
vely linked to the Moon Organization.

The subcommittee found no evidence of collaboration between

ongsun Park and the Moon Organization in the purchase of stock.

Both the Moon Organization and Tongsun Park used similar

lethods to avoid the 5-percent limitation on stock purchases by a

ngle individual or organization. Park bought $250,000 of stock in

le names of his business associates, using funds from one of his

\ )mpanies. The Moon Organization, though it financed its pur-

I lases in several ways, principally bought its stock— $738,000

i orth— in the names of 13 church members. Pak Bo Hi coordinated

?!ieir investments and paid for the stock in cash which he said he

received from the "Unification Church Pension Fund Internation-

; , ." The subcommittee was unconvinced that such a fund was ever

[ 5tablished or used for that purpose. Both Tongsun Park and Pak

: 0 Hi characterized the transfer of funds to purchasers as no-

|,.terest, no-collateral, 10-year loans.

J In September 1977, the SEC charged Tongsun Park, Pak Bo Hi,

J !id the Diplomat National Bank with securities violations arising

jom the bank's representations that no individual owned or had a

T .meficial interest in more than 5 percent of the bank's stock. The

;5C charged that Tongsun Park had bought approximately 10

ircent through three nominees, and Pak Bo Hi approximately 43

?rcent through 18 nominees. The charges were eventually settled

consent decrees.

The SEC complaint was filed prior to the disclosures by Pak Bo
i and Charles Kim in testimony they made under grants of
imunity. Pak in effect denied that he had been acting as an
dividual in the purchase. Although Pak was unable to name any
gal entity in control of the fund, he suggested that the Unifica-
3n Church or some other component of the Moon Organization
as the actual owner of the funds used to purchase the bank stock,
so, the Moon Organization, in addition to violating the Diplomat
ational Bank's 5-percent limitation, may have violated banking
ws which prohibit an organization or "holding company" from
ming more than 25 percent of the stock in an American bank."^
The Korean Government, particularly the KCIA, participated in
e establishment and operation of the Diplomat National Bank,
le KCIA station chief in Washington, Kim Yung Hwan, was in
squent contact with Charles Kim beginning in the summer of
'75. It was Kim Yung Hwan who negotiated the opening of an
i count for the Korean Embassy; likewise Kim Yung Hwan helped
'larles Kim make arrangements to go to Seoul, shortly after the

'n2U.S.C. 1841.

386

bank opened, to establish a correspondent relationship with
Korean banks. Kim met with the KCIA Director in Seoul, and the
KCIA apparently smoothed the way for him to meet the appropri-
ate banking officials in the Government. Kim worked through the
KCIA because "it is customary that no business can be done unless
the Government opens the door for you * * *." «**

The subcommittee found no evidence that money of the Korean
Government helped finance initial investments in the bank. How-
ever, the government may have provided the $50,000 later invested
by Choi Che Yung, who bought stock sold back to the bank by Duk
Moon Aum. He used some of the funds Yang Doo Won sent to the
KCIA in Washington with instructions that it be given to Choi. The
monev, according to Choi and Kim Sang Keun, could have been
Yang s private funds, which he — perhaps along with others —
sought to invest in the United States. Choi told subcommittee staff
that he invested the money in the Diplomat National Bank without
Yang's knowledge.

Although the subcommittee could not interview Yang and had no
evidence to contradict Choi's statement, it should be noted that
Choi's company had business dealings with the KCIA during this
period and that Choi once told Charles Kim that the money to buy
the bank stock came from a research contract with the Korean
Government. Moreover, the purchase of stock with Yang's money
occurred only a few months after Yang and Charles Kim had
discussed the Diplomat National Bank during Kim's trip to Korea.
Taking all of these factors into consideration, the subcommittee
could not dismiss the possibility that the $50,000 invested by Choi
was KCIA money, although it is more probable that Yang Doo Won
regarded the money as his own.

There was no evidence that the money invested by Tongsun Park
came from Korean Government sources, although it is noteworthy
that at the time he made the investment. Park was acting as a
KCIA agent in other respects. ^^^ Likewise, there was no evidence
that the funds invested in the bank by the Moon Organization
came from the Korean Government.

Until the true source of the cash used in these purchases is
documented and it is known how the cash was brought into the
United States, it will not be possible to make a definitive statement
about whether or not the Moon Organization received aid and
direction from the Korean Government in connection with its in-
vestment in the Diplomat National Bank.

Whether the Moon Organization did or did not invest in the
bank in cooperation with the Korean Government, it was clear to
the subcommittee that control over the bank was the Moon Organi-
zation's objective. It would have helped the organization keep cur-
rency "freely coming back and forth," in Moon's own words, with-
out attracting the attention of neutral bank officers, and would
have facilitated loans for business investments.

By early 1976, both the Moon Organization, through its invest-
ments and deposits, and to a lesser extent the Korean Government,

•" Sworn statement of Charles Kim.

•" Kim Sang Keun, KCIA officer at the Korean Embassy, was instructed to teach Park how to
transmit intelligence reports to Seoul for the KCIA. This operation lasted only 1 month,
in August and September 1975. The deteiils are set forth in House Committee on Standards of
Official Conduct Hearings, October 1977.

387

through its control over correspondent banking relationships, were
in a position to influence the future course of the Diplomat Nation-
al Bank. Adverse publicity beginning in the spring of 1976 inter-
rupted whatever plans either the Government or the Moon Organi-
zation might have had to use and control the bank. Since then, the
Moon Organization has been preoccupied with explaining its in-
vestment and the sources of funds to investigating authorities, and
minimizing the adverse publicity arising from its attempt to gain
control of an American bank.

Conclusions and Recommendations

The subcommittee findings regarding the Moon Organization
may be summarized as follows:

(1) The UC and numerous other religious and secular organi-
zations headed by Sun Myung Moon constitute essentially one
international organization. This organization depends heavily
upon the interchangeability of its components and upon its
ability to move personnel and financial assets freely across
international boundaries and between businesses and nonprofit
organizations.

(2) The Moon Organization attempts to achieve goals out-
lined by Sun Myung Moon, who has substantial control over
the economic, political, and spiritual activities undertaken by
the organization in pursuit of those goals.

(3) Among the goals of the Moon Organization is the estab-
lishment of a worldwide government in which the separation
of church and state would be abolished and which would be
governed by Moon and his followers.

(4) In pursuit of this and other goals, the Moon Organization
has attempted, with varying degrees of success, to gain control
over or establish business and other secular institutions in the
United States and elsewhere, and has engaged in political
activities in the United States. Some of these activities were
undertaken to benefit the ROK Government or otherwise to
influence U.S. foreign policy.

(5) While pursuing its own goals, the Moon Organization
promoted the interests of the ROK Government, and at times
did so in cooperation with, or at the direction of, ROK agencies
£uid officials. The Moon Organization maintained mutually
beneficial ties with a number of Korean officials.

(6) The Moon Organization established the KCFF ostensibly
as a nonprofit foundation to promote Korean-American rela-
tions, but used the KCFF to promote its own political and
economic interests and those of the ROK Government.

(7) The Moon Organization extensively used the names of
Senators, Congressmen, U.S. Presidents, and other prominent
Americans to raise funds and to create political influence for

' itself and the ROK Government.

(8) A Moon Organization business is an important defense
contractor in Korea. It is involved in the production of M-16
rifles, antiaircraft guns, and other weapons.

(9) Moon Organization agents attempted to obtain permission
from an American corporation to export M-16's manufactured
in Korea. The M-16's are manufactured under a coproduction

35-508 O - 78 - 26

388

agreement approved by the U.S. Government, which puts M-16
production under the exclusive control of the Korean Govern-
ment. Despite this, Moon Organization representatives ap-
peared— apparently on behalf of the Korean Government— to
negotiate an extension of the agreement.

(10) The Moon Organization attempted to obtain a control-
ling interest in the Diplomat National Bank by disguising the
source of funds used to purchase stock in the names of UC
members.

(12) The Moon Organization used church and other tax-
exempt components in support of its political and economic
activities.

(13) Although many of the goals and activities of the Moon
Organization were legitimate and lawful, there was evidence
that it had systematically violated U.S. tax, immigration, bank-
ing, currency, and Foreign Agents Registration Act laws, as
well £is State and local laws relating to charity fraud, and that
these violations were related to the organization's overall goals
of gaining temporal power.

Despite the Moon Organization's cooperative relationship with
the ROK Government the UC was far less influential as a religious
movement in Korea than elsewhere. A large proportion of the
hundreds of Koreans interviewed in the course of the investigation
said that they had never heard of Moon or the UC until the early
or mid-1970's, when their activities became widely publicized. In
the United States, the UC appears to have had little success in
attracting followers from the Korean community. Most Korean-
Americans interviewed expressed varying degrees of embarassment
or hostility toward Moon and the UC; few saw them as a positive
factor in Korean-American relations.

The subcommittee found that the Moon Organization has had a
number of influential allies in the Korean Government, including
Kim Jong Pil, Pak Chong Kyu, and others.

Although investigations and publicity in the 1976-78 period ap-
peared to have had an effect on the degree of influence Moon's
supporters had with the Korean Government, there were continu-
ing indications that the Moon Organization retained significant
support.

Many of the activities of the Moon Organization would not raise
questions of impropriety if carried out openly and without viola-
tions of laws. The subcommittee does not fault the many Ameri-
cans, Koreans, and others who identified themselves with Moon
Organization-sponsored activities such as the Little Angels, or who
shared the Moon Organization's expressed concerns about commu-
nism and South Korean security.

However, the Moon Organization's ulterior motives behind even
its most benign activities tended to negate its positive contribu-
tions. For example, the Little Angels, a highly accomplished chil-
dren's dance group, undoubtedly improved the image of Koreans
around the world and in particular contributed to Americans' un-
derstanding of Korean culture. The Korean Government's decision
to bar the Little Angels from traveling outside Korea was a loss for
Korean-American relations. The demise of the Little Angels as a
touring group followed growing public awareness of its ties to

389

Moon, who— after founding and quietly backing the group— in-
creasingly used It to further his political and economic goals. In his
own speeches to followers, Moon made it clear that the Little
Angels, the annual science conference, and other seemingly philan-
thropic projects were in reality geared toward his ambitious and
carefully thought out plans for winning control and influence over
political and other secular institutions.

Moon, like Tongsun Park, showed a keen understanding of the
use of imagery m building political influence. Just as Tongsun
Park used his close relationship with a few Congressmen to attract
others. Moon used the names and pictures of prominent Ameri-
cans, Japanese, Koreans, and others to create an image of power
and respectability for himself and his movement. The multifaceted
Moon Organization thereby obtained the help and cooperation of
numerous Americans who had no idea they were contributing to
Moon's plan for world theocracy.

Like Tongsun Park and others who conducted pro-ROK influence
activities in the United States, Moon and his organization acted
from a mixture of motives and objectives. Service to Korea was
combined with a desire to advance personal and organizational
goals. Like Tongsun Park and others. Moon and his organization
attempted to gain influence in Seoul through activities in the
United States; to this end, the Moon Organization exaggerated its
successes in the United States to create influence in Korea and
elsewhere. Thus, although the Moon Organization often acted for
the ROK Government — even to the point of accepting money for its
services — control and influence over Korean political institutions
was no less a goal there than in the United States. In this respect,
the Moon Organization was not an agent of influence for the ROK
Government so much as it was a volatile factor in Korean-Ameri-
can relations, capable of distorting the perceptions each country
held of the other.

In the United States, for example. Moon has aroused widespread
antipathy. To the extent that his organization's activities here are
associated with Korea or the Korean Government, there is poten-
tial harm to Korean-American relations. Recent attempts by the
ROK Government to dissociate itself from Moon seemed to recog-
nize this problem. However, these attempts at dissociation came
only in the context of a public controversy over Moon, investiga-
tions into Korean influence activities, and strained relations be-
tween the two countries.

The misuse of the names of prominent Americans by the KCFF
was of concern to U.S. Government agencies as early as 1966. Much
of the executive branch's early awareness of Korean influence
activities in the United States— including those of Tongsun Park-
arose from State Department and congressional inquiries into
KCFF publicity and fundraising activities. However, these activi-
ties were not then perceived to be linked to Moon. Later, when
Moon's activities generated publicity in the United States, there
were numerous requests to the executive branch, as well as to the
Congress and to State and local authorities, for information about
Moon and for investigations of his organizations' activities. The
response to these inquiries was fragmented. Numerous investiga-
tions were launched by agencies such as the SEC, INS, and Depart-

390

ment of Justice which involved one or another component of the
Moon Organization. The subcommittee's investigation led it to con-
clude that these investigations were justified and should continue.
However, the subcommittee believes that these investigations will
be inconclusive and redundant unless they are coordinated with
one another and treated as an investigation of essentially one
organization. The subcommittee concludes that the following objec-
tive could be met by combining investigative activities related to
the Moon Organization into an interagency task force:

(1) Consideration could be given as to whether apparently
unrelated immigration, FARA, currency, banking, and other
violations were in furtherance of a common scheme or plan.

(2) All existing information bearing upon the same subjects
could be brought together and analyzed; earlier investigations
which failed to do this allowed improper influence activities to
continue until they caused a major public scandal affecting
Korean-American relations.

(3) Maximum resources could be employed toward tracing
cash and obtaining evidence from outside the United States.

(4) Tax money could be saved by combining related investiga-
tions and eliminating duplication of effort.

Executive branch task force

(1) The Department of Justice, the SEC, the IRS, and other
executive branch agencies currently investigating allegations relat-
ing to Sun Myung Moon, Pak Bo Hi, the UC, the KCFF, and other
individuals and organizations comprising the Moon Organization
(as described in this report) should coordinate their efforts and
form an interagency task force.

(2) In addition to continuing present investigations, the task force
should address itself to the following issues:

(a) Whether there have been systematic and planned viola-
tions of U.S. immigration laws and regulations in connection
with the importation of large numbers of foreign nationals for
purposes of fundraising, political activities, and employment in
the Moon Organization business enterprises.

(b) Whether there have been systematic and planned viola-
tions of U.S. currency and foreign exchange laws in connection
with the movement of millions of dollars of cash and other
financial assets into and out of the United States without
compl3dng with appropriate reporting requirements.

(c) Whether U.S. tax laws have been violated through large
cash transfers to individuals which were characterized as
loans.

(d) Whether tax-exempt organizations such as the Unifica-
tion Church, Freedom Leadership Foundation, Korean Cultural
and Freedom Foundation, and International Cultural Founda-
tion, have engaged in political, business, and other activities
inconsistent with their tax-exempt status; and whether these
organizations are so closely affiliated with each other and with
non-tax-exempt businesses and organizations so as to render
them ineligible for tax-exempt status.

(e) Whether there have been systematic violations of the
Foreign Agents Registration Act by the Moon Organization.

391

(f) Whether there have been violations of currency, immigra-
tion, banking, and tax laws in connection with Moon Organiza-
tion mvestments in the Diplomat National Bank and other
businesses in the United States.

(g) Whether there have been instances of charity fraud, vio-
lations of currency and immigration laws, and abuse of tax-
exempt status in connection with the Moon Organization's con-
trol over the Korean Cultural and Freedom Foundation.

(h) Whether there have been attempts to violate, or viola-
tions of, the Arms Export Control Act in connection with the
manufacture, sale, or attempted sale of M-16 rifles or other
armaments by agents of the Moon Organization.

(3) The task force should use the resources of the following
agencies:

Department of Justice (including the FBI, Anti-Trust Divi-
sion, and INS);
Department of Treasury;
Securities and Exchange Commission;
Federal Reserve Board;
Internal Revenue Service; and
Department of State.

(4) The Department of State should assist the task force in at-
tempting to obtain witnesses, financial data, and other cooperation
from foreign governments, particularly Japan and South Korea.

(5) The task force should seek information from appropriate
State and local governments and should make information availa-
ble to State and local governments for use in appropriate proceed-
ings involving enforcement of their laws.

The subcommittee also recommends that appropriate committees
of the Congress review certain information pertaining to the Moon
Organization. Current U.S. tax laws and regulations made it im-
practical for the subcommittee to examine the tax returns of such
Moon Organization components as the Unification Church Interna-
tional, which was denied tax-exempt status by the IRS. However,
there is reason to believe that taxable Moon Organization compo-
nents derive tax advantages from transfers to tax-exempt compo-
nents. Since both taxable and tax-exempt organizations are used
interchangeably in the Moon Organization, such tax advantages
would enable the Moon Organization to pyramid economic power
and achieve a substantial advantage over competing organizations.
The subcommittee therefore suggests a review by the House Ways
and Means Committee and the Senate Finance Committee — which
have access to tax returns — to determine whether transfers of
funds within the Moon Organization raise issues which point to the
need for legislation to prevent the abuse of tax-exempt status.
More specifically, the subcommittee recommends that the House
Ways and Means Committee and the Senate Finance Committee
review the applications for tax-exempt status (where applicable)
and the tax returns of Moon Organization entities, including:

Unification Church; Freedom Leadership Foundation; Unifi-
cation Church International; International Cultural Founda-
tion; Korean Cultural and Freedom Foundation; Tong-Il Enter-
prises; One-Way Productions; International Oceanic Enter-
prises; and News World Communications.

392

and determine whether:

(a) Income from abroad is properly reported.

(b) Deductions are taken by businesses for charitable contri-
butions to tax-exempt organizations, the actual control of
which is in the hands of the same persons and organizations in
control of the businesses.

(c) New legislation or regulations are needed to prevent tax
avoidance and pjn-amiding of economic power by means of
recycling funds through an international organization, part of
which is tax-exempt.

The subcommittee has also referred its findings to the Armed
Services and Intelligence Committees of the House and Senate, and
to the Munitions Control Board of the State Department, with the
suggestion that more precise information be obtained about the
Moon Organization's role as a Korean defense contractor. During
the investigation, the subcommittee found it very difficult to obtain
reliable information about the extent to which Moon industries
were involved in weapons production and sales. The Moon Organi-
zation has self-proclaimed goals of controlling political and secular
institutions and a strident ideology which envisions the formation
of a "Unification Crusade Army." Moon's speeches foresee an
apocalyptic confrontation involving the United States, Russia,
China, Japan, and North and South Korea, in which the Moon
Organization would play a key role. Under these circumstances,
the subcommittee believes it is in the interest of the United States
to know what control Moon and his followers have over instru-
ments of war and to what extent they are in a position to influence
Korean defense policies.

Of particular concern is the Moon Organization's involvement in
the production and sale of M-16 rifles and other weapons provided
to Korea under U.S. aid programs and subject to the Arms Export
Control Act. In late 1977, Moon Organization representatives tried
to renegotiate a coproduction agreement between Colt Industries
and the ROK Government. The circumstances suggested they were
secret envoys of the Korean Government which, under the copro-
duction agreement, has exclusive control over M-16 production.
Although the ROK Government said it wanted to produce 300,000
extra M-16's because of the need to equip its own forces. Moon
Organization representatives tried to get Colt's agreement to
export guns to third countries.

The subcommittee therefore recommends:

That the House International Relations Committee, the House
Armed Services Committee, and the corresponding committee of
the Senate ascertain whether businesses operated by the Moon
Organization are engaging in the production or sale of armaments
supplied to the ROK Government through U.S. military aid pro-
grams, including coproduction agreements. Information about the
role played by Moon Organization industries in Korean defense
production should be sought from the appropriate U.S. defense and
intelligence agencies.

393
VI. International Agreements Between the United States

AND THE RePUBUC OF KOREA

One of the allegations prompting the subcommittee's investiga-
tion was that the United States had concluded several agreements
with the Republic of Korea which were not reported to Congress.^
This information came from a 1976 GAO report entitled **U.S.
Agreements with the Republic of Korea." ^

The issue that significant international agreements had been
made by the executive branch without congressional awareness
was first examined in detail in hearings held in 1970 by the Sub-
committee on Security Agreements and Commitments Abroad of
the Senate Committee on Foreign Relations. One of the agree-
ments discussed was the 1966 Brown memorandum, a letter from
U.S. Ambassador Winthrop Brown to Korean Minister of Foreign
Affairs Lee Tong Won outlining the various types of economic and
military assistance the U.S. would provide as compensation for
Korea's participation in the Vietnam war. The executive branch
had not informed Congress of the Brown commitments, which
amounted to $927 million between 1966 and 1970.^

The disclosures led Senator Clifford P. Case to introduce a bill,
passed in August 1972 (Public Law 92-403), requiring the Secretary
of State (through the Office of Treaty Affairs) to transmit the text
of all international agreements other than treaties to the House
Ck)mmittee on International Relations and the Senate Committee
on Foreign Relations not later than 60 days after going into force.
Agreements involving national security are to be transmitted
under an injunction of secrecy.* The procedures established to im-
plement this legislation give the executive branch official who
negotiated the agreement responsibility for transmitting its text to
the Office of Treaty Affairs at State. The Assistant Legal Adviser
then has the task of determining which commitments made by the
United States or its agencies constitute international agreements
and then transmitting those agreements to the congressionad com-
mittees.

In 1975, Senator Abourezk requested that GAO look at compli-
ance with the Case Act. The country selected for study was Korea
because a GAO team was preparing to go there at the time of the
request. The study revealed that between 1972 and 1975, the
United States and Korea had concluded 59 international agree-
ments (as defined by GAO). State had been notified of 25, which it
reported to Congress. The remaining 34, defined as "operating,
implementing or agency-to-agency agreements," were never sub-
mitted to the State Department. =^

' The report suggested that some of the international agreements not reported to Congress
were sensitive intelligence agreements. In its investigation, the subcommittee was told that if
such arrangements existed, they would be oral arrangements, not reduced to writing, and
therefore would not be reported to Congress under the Case Act. The subcommittee, however, was
unable to find any indications that such oral or written intelligence arrangements between the
United States and Korea existed. Amendments to the Case Act currently before Congress
address the issue of oral agreements and their reporting under the Act.

» Report of the Comptroller General of the United States (GAO), "U.S. Agreements with the
Republic of Korea," Feb. 23. 1976. ^^ ^^ ^

'Senate Subcommittee on United States Security Agreements and Committments Abroad,
"Hearings Related to Korea," vol. II, Feb. 24, 25, and 26, 1970, pp. 1519-1768; Senate.

* Senate Committee on Foreign Relations, hearings, Oct. 20, 1971, p. 5; see also Part C-IV:
Economic Relations," p. 174, for more details on the Brown memorandum.

»Op. cit., 1976 GAO report, p. 12.

394

Most of the 34 unreported agreements were insignificant and
need not have been reported to Congress, such as one to extend 8th
Army rod and gun club privileges to Korean non-Status of Forces
personnel. The GAO report noted, however, that these agreements
still should have been forwarded to the Office of Treaty Affairs at
State.

Eight of the 34 were identified by GAO as important because
they involved substantial transfers of American money and equip-
ment. Four dealt with the relocation of Korean troops from Viet-
nam to Korea and a transfer of $37.6 million of U.S. equipment to
South Korea. The four others addressed the closeout of the 1966
Brown memorandum in terms of payments to Korean soldiers and
represented expenditures of $365.3 million. Despite the significant
costs of these eight agreements, the Defense Department had de-
fined them as implementing agreements and did not forward them
to the State Department.®

The 1976 GAO report on the Case Act also made reference to two
agreements which preceded the law. One was the 1970 moderniza-
tion plan, a $1.5 billion program to modernize the Korean armed
forces as compensation for the withdrawal of 20,000 U.S. troops
from Korea. Defense and State Department officials did not consid-
er the Modernization Plan as an international agreement because it
did not constitute a formal U.S. commitment.^ The second was the
1971 Textile Agreement, which included arrangements whereby
the United States would provide Korea $100 million in AID devel-
opment loans and $275 million in Public Law 480 assistance, both
over a 5-year period. These arrangements were not identified to
Congress as part of the Textile Agreement. ® The GAO study said the
Modernization Plan and the commitments attached to the Textile
Agreement represented types of arrangements which Congress
might wish to examine under the Case Act.

Since the publication of the 1976 GAO report. State has renewed
its efforts to standardize executive branch reporting procedures. In
March 1976, it circulated a statement giving the criteria for what
constitutes an international agreement and reminding government
officials of the reporting requirements of the Case Act. Five criteria
were listed and elaborated on by State's Legal Adviser:

(1) Intention of the parties to be bound in international law;

(2) Significance of the arrangement;

(3) Requisite specificity, including objective criteria for determining enforceability;

(4) The necessity for two or more parties to the arrangement;

(5) Form.»

The criteria statement is currently in use by the executive
branch.

In 1976, representatives of the Office of Treaty Affairs began
examining the files at the General Counsel's Office at the Depart-
ment of Defense to make sure all defense agreements were report-
ed to State. At the same time, the Commander in Chief of the
Pacific Command (CINCPAC) instituted new procedures and guide-
lines for its subordinate commands to insure that they forwarded

« Op. cit., 1976 GAO report, pp. 14-15.

'Ibid.

*See "Part C-IV: Korean-American Economic Relations," pp. 191-196.

•"Digest of United States Practices in International Law 1976," September 1977, p. 265.

395

copies of all their agreements to CINCPAC headquarters and the
Pentagon.

The 95th Congress itself showed an interest in increasing the
effectiveness of the Case Act. In 1977, the law was amended to
require executive branch agencies to inform State of all interna-
tional agreements within 20 days of their being concluded.*®

In 1978, the subcommittee met with representatives of GAO,
State, Defense, and CINCPAC to ascertain if the problems detailed
in the 1976 report had been corrected. All stated that agency
reporting had improved and that as the reporting procedures
became more widely known within the executive branch, reporting
would continue to improve. Congressional aides responsible for
Case Act compliance generally agreed with this assessment, though
they did see late transmittals (reporting the text of international
agreements to the committees after the 60-day deadline) as more of
a problem than did executive branch officials.

As of 1978, Congress had before it several amendments to the
Case Act, including putting oral agreements in writing for submis-
sion to Congress, requiring explanations for late transmittals, re-
quiring approval by the Secretary of State or the President before
beginning negotiations, designating the Secretary of State as the
final authority in determining what constitutes an international
agreement, and requiring the President to issue orders that all
executive branch agencies comply with the Case Act.

The 1976 GAO report accurately identified the haphazard report-
ing of agreements by executive branch agencies to State as the
major difficulty in achieving compliance with the Case Act. These
problems are in the process of being eliminated by the new proce-
dures within the executive branch and by amendments to the Case
A.ct before Congress."

•o This provision was added to the Case Act as a ttoor amendment to the State Department
ipplemental authorization of 1977 on May 11 by the Senate and was accepted m cotiference. It

as enacted June 15, 1977. „ , . * ^. • i.- a * f „^„i v^o^

"Senate Committee on Foreign Relations. Foreign Itelations Authorization Act Fiscal Year
)79, Report of the Committee on Foreign Relations, U.S. Senate together with addition^ views
1 S. 3076. May 15. 1977. pp. 45-50. Subsequent to the writing of this report, these amendments
ere adopted with certain modifications.

396

VII. Immigration and Naturalization Service Issues

The subcommittee became aware of a number of cases in which
Koreans encountered considerable difficulty dealing with the Immi-
gration and Naturalization Service (INS). These individuals could
not return safely to Korea because of their opposition to the
Yushin system and consequently had applied for permanent resi-
dent status or political asylum in the United States.

SECTION 13(C) CASES

Section 13 of the act of September 11, 1957,^ authorizes the
Attorney General to approve permanent resident status for certain
foreign diplomats (not more than 50 in any year) assigned to the
United States, unless either House of Congress disapproves the
application within two sessions of Congress. The relevant part of
section 13(c) reads:

* * * A complete and detailed statement of the facts and pertinent provisions of
law in the case shall be reported to the Congress with the reasons for such adjust-
ment of status * * *

To apply for permanent resident status, a foreign diplomat must
have terminated his position with the foreign government he was
representing. He must fill out an INS form, have a complete medi-
cal examination, and give a sworn statement to INS officials con-
taining his reasons for not wanting to return to his country of
origin. If INS approves the application, it then provides Congress
with an order (usually one page which does not contain detailed
information or the sworn statement) for permanent resident status.

The subcommittee became interested in the 13(c) process because
several individuals who had been helpful to the investigation and
their families had been denied permanent resident status by the
House of Representatives. In each case, the petitioners had fulfilled
all of the INS requirements and INS had approved their requests
and submitted their forms to Congress.

Three cases of former Korean diplomats are described below.

Case No. 1: Lee Jai Hyon

As previously noted, Lee Jai Hyon had served as chief cultural
and informational attache at the Korean Embassy in Washington,
D.C. In the spring of 1973, he attended Embassy meetings at which
the KCIA station chief described a KCIA plan for clandestine oper-
ations in the United States.^ Lee was unwilling to assist in imple-
mentation of the plans and in KCIA efforts to force a former
subordinate of his, Hyohk Hoon Han, to return to Seoul. In subse-
quent months, Lee found himself a target of KCIA displeasure. His
loyalty was questioned; he and his family were placed under sur-
veillance; he was interrogated by the KCIA; and it was suggested
that he return to Seoul for discussions. Lee resigned from the
Embassy in June 1973, and applied for permanent resident status
for himself, his wife, and four children. In June 1975, Lee testified
before the subcommittee regarding KCIA plans for clandestine op-
erations in this country and about payments to Congress by
Korean Ambassador Kim Dong Jo. In October 1977, he testified

> 71 Stat. 642-643.

'See "Part C-II: Intelligence Activities and Plans," p. 106ff.

397

before the House Committee on Standards of Official Conduct
about Kim Dong Jo s activities.

On May 29, 1975, INS adjusted the status of Lee and his family
to that of lawful permanent residents of the United States. How-
ever, in September 1976, the House of Representatives disapproved
their status because the information INS had submitted was inad-
equate. To date, Lee and his family have been unable to obtain
permanent resident status.

Case No. 2: Hyohk Hoon Han

Hyohk Hoon Han was Lee Jai Hyon's subordinate at the Korean
Embassy. He said he resigned his embassy position in May 1973
because he was unwilling to work for the Korean Government
under the Yushin system. Following his resignation, Han was the
target of KCIA efforts to force him to return to Korea. Lee Jai
Hyon told the subcommittee that Han would have been in danger
had he returned.

Han and his family applied for permanent resident status in
June 1974. The INS approved the adjustment of status on February
23, 1976. The applications were rejected by the House of Represen-
tatives because INS failed to provide adequate information. To
date, the Hans have not received permanent resident status.

Case No. 3: Sung-Han Kim

From 1950 to 1967, Kim worked with the U.S. military in Korea
as a translator and liaison officer on active duty with the Korean
Army. He also worked with U.S. military intelligence. From 1967
to 1973, he was a journalist in Korea, but with the adoption of the
Yushin system, he said he felt unable to function as a journalist
and accepted a diplomatic post with assignment in the United
States. Kim served as a diplomatic officer in the Cultural and
Information Section of the Korean Embassy from 1973 to 1975. At
that time, he was ordered transferred to Manila but refused to go
and resigned. In April 1975, he and his family applied for perma-
nent resident status. Since then, Kim has worked as an escort and
translator for the State Department. He has continued to express
opposition to the ROK Government.

INS approved Kim's adjustment of status in January 1976. On
October 12, 1977, the House of Representatives disapproved it be-
cause INS had not provided adequate information. To date, Kim
and his family have not obtained permanent resident status.

Two additional cases

There were two other cases of special interest to the subcommit-
tee because they also involved individuals who remained in the
United States and have given valuable assistance to the U.S. Gov-
ernment. Both were former KCIA officials who, if they were to
return to Korea, would clearly be in grave danger. In these in-
stances, the INS apparently did not even notify the applicants of
the possibility of a section 13(c) adjustment of status, although they
appeared to be typical cases.

Kim Sang Keun was a KCIA official stationed in Washington,
D.C., from 1970 to 1976. He was responsible during much of that
time for Korean resident affairs. In the midst of the revelations

398

about the Korean scandal in the fall of 1976, his relationship with
Hancho Kim and Tongsun Park was revealed in the press and at
the sapie time the ROK Ambassador Hahm Pyong Choon informed
him that he would have to take responsibility for the scandal by
going to prison in Seoul. He decided to seek the protection of the
U.S. Government and cooperate with the investigations. He pro-
vided valuable testimony for the Department of Justice which led
to the conviction of Hancho Kim. He was also a valuable witness
for the House Committee on Standards of Official Conduct and for
this subcommittee. At the time of this report, the immigration
status of Kim Sang Keun and his family is still uncertain and
depends on his finding a job which will qualify him for third or
sixth preference.^

Sohn Ho Young was a KCIA official stationed first in Houston
and later in New York. He was involved in the unsuccessful at-
tempts to persuade former KCIA director Kim Hyung Wook not to
testify before the subcommittee. He became disillusioned by the
negotiations in which the ROK Government seemed genuinely to
fear Kim Hyung Wook's threat to reveal matters of personal scan-
dal relating to high Korean officials. He was also afraid he would
be blamed for the failure to prevent Kim from testifying. Conse-
quently, Sohn sought the protection of the U.S. Government
through this subcommittee. His cooperation and testimony, espe-
cially his verification of the "1976 KCIA Plan for Operations in the
United States," were very helpful to the subcommittee.

An INS official who had interviewed one of these applicants
stated that he had not avoided recommending application under
13(c) because of the current dispute between the Judiciary Commit-
tee and the INS (see below) over the correct information required
by law for a section 13(c) application. Rather, in recommending how to
apply for permanent resident status, he uses the likelihood of
successful application as one of his criteria. He claimed that the
recent history of the 13(c) applications made it seem disadvanta-
geous.

THE SECTION 13(C) PROBLEM

The disposition of those three cases were t)rpical of a broader
pattern of rejections by the House that affected over 70 individuals
from a number of countries applying under section 13(c) for perma-

^ The preference categories are defined by 8 U.S.C. 1153 as follows:
^"§ 1153. Allocation of immigrant visas — Categories of preference priorities; per centum limita-
tions; conditional entries; waiting lists.

"(a) Aliens who are subject to the numerical limitations specified in section 1151(a) of this
title shall be allotted visas or their conditional entry authorized, as the case may be, as
follows:* • •

"(3) Visas shall next be made available, in a number not to exceed 10 per centum of the number
specified in section 1151(a) (1) or (2) of this title, to qualified immigrants who are members of the
professions, or who because of their exceptional ability in the sciences or the arts will substantially
benefit prospectively the national economy, cultural interests, or welfare of the United States, and
whose services in the professions, sciences or arts are sought by an employer in the United
States. • • •

♦•*••*•

"(6) Visas shall next be made available, in a number not to exceed 10 per centum of the number
specified in section 1151(a) (1) or (2) of this title, to qualified immigrants who are capable of
performing specified skilled or unskilled labor, not of a temporary or seasonal nature, for which a
shortage of employable and willing persons exists in the United States. * * *

399

nent resident status in 1975 and 1976. For example, all 46 applica-
tions for permanent resident status submitted to Congress between
January 1975 and July 1975 were disapproved, in each case due to
the inadequacy of the information provided by INS

In a letter dated September 3, 1976, to Attorney General Edward
Levi, Representative Joshua Eilberg, chairman of the House Judi-
ciary s Subcommittee on Immigration, Citizenship, and Internation-
al Law, noted that the reports submitted under section 13(c) were
deficient "as to content, reliability of facts, and conformity to the
original intent of Congress." Chairman Eilberg requested that the
cases submitted in 1975 and 1976 be withdrawn and resubmitted
with the necessary additional information.

On September 22, 1976, the Judiciary Committee issued a
report * echoing Representative Eilberg's concerns:

, * * *. The committee recalls that the purpose of this section as reflected in the
legislative history, is to permit the adjustment of immigration status to a limited
number (50) of foreign diplomats who for compelling reasons may find it impossible
to return to the countries which accredited them to the United States (Report No
1199, 1st Session— 85th Congress).

Considering the information submitted to the Committee, it has been difficult to
determme whether any of the cases under review satisfy the requirement that
compelling reasons must exist which make it impossible for the applicant to return
to the countries which accredited him to the United States.

The Committee has noted none of the cases submitted to the Congress were
accompanied by a complete and detailed statement of facts as required under this
section * • *.

The report concluded by asking:

• the Attorney General to reexamine them [the cases] under the relevant
statutory criteria, the accompanying legislative history, and the administrative
regulations promulgated under section 13(c) of the Act of September 11, 1957, and to
resubmit those cases considered to be valid in the next Congress.

INS did not act on this request, and as a result, the House
disapproved the submissions by H.R. 1555 adopted September 28,
1976. Similarly, INS took no remedial action on the 1976 submis-
sions. The House therefore disapproved all applications for perma-
nent resident status except for one family of four about whose
situation they had sufficient independent information.

In a letter addressed to Chairman Eilberg, dated March 2, 1978,
INS Commissioner Castillo set forth the INS interpretation of the
requirements of section 13.

To establish eligibility for relief under section 13, an alien within the foregoing
classes must satisfy the Attorney General (who consults with the Secretary of State)
that (a) he is a person of good moral character, (b) he is admissible to the United
States for permanent residence under the Immigration and Nationality Act, and (c)
that his adjustment to resident would not be contrary to the national welfare,
safety, or security.

There is no mention in section 13 of "compelling reasons" for being unable to
return to the country of accreditation as a factor in either eligibility or the exercise
of the Attorney General's discretion.

While legislative history may be helpful in construing ambiguous or doubtful
provisions of law, where the statutory language is plain, as here, the need for
interpretation does not arise. Further, administrative authorities generally should
not read into a statute provisions which the legislature chose to omit. Particularly
this is true where the statute is remedial in nature and the proposed interpretation
would be restrictive.

Report No. 94-1659.

400

The Commissioner concluded:

Since .my review has indicated that all Service-approved applications met the
requirements of section 13, and in view of the disapproval of permanent residence
for those aliens [by the House] * * * I now intend to require the aliens' departure
or other appropriate disposition in their cases, as mandated by section 13(c) of the
1957 Act.

Since that date, the Judiciary Subcommittee has been discussing
the matter with INS and has held hearings. INS has not undertak-
en any remedial action on the cases as requested by the Judiciary
Subcommittee.

INVOLVEMENT OF THE SUBCOMMITTEE ON INTERNATIONAL
ORGANIZATIONS

This subcommittee became aware of the situation in March 1978
and contacted INS. Officials initially expressed no concern about
the matter, stating that INS had approved the applications and
submitted to Congress the information required under section 13(c)
and that Congress had improperly rejected them.

Following repeated expressions of concern by this subcommittee,
staff members met with representatives of INS and staff of the
Judiciary Subcommittee. INS agreed to undertake further efforts
on behalf of the individuals who were rejected and to submit other
reports to the Judiciary Subcommittee. None have been submitted
to date. Furthermore, INS has refused to resubmit the disapproved
section 13(c) applications for reconsideration, claiming that it lacks
any legal basis to do so. The Judiciary Subcommittee stated that
there was no legal support for INS' position, but to date neither the
Judiciary Subcommittee nor this subcommittee has been able to
convince INS to change its position.

An additional concern of the subcommittee was the indifferent
treatment of these individuals by INS. The questions asked of the
applicants in connection with their sworn statement were general-
ly not as probing as they could have been, thus leaving out a great
deal of the detailed information required by the Congress, includ-
ing the "compelling reasons" for applying for permanent resident
status. Up to the time when this subcommittee became involved,
INS had failed to notify these individuals of the disapproval of
their applications, leading them to believe their applications were
proceeding satisfactorily and that in due course thev would obtain
permanent resident status. Since the subcommittee s involvement,
the INS has shown greater interest in the cases of Lee Jai Hyon
and Kim Sung Han, but as of 1978, Hyohk Hoon Han had received
no notification of the rejection of his application other than that
given him by the subcommittee.

Because of this indifference, the individuals have been suffering
psychologically. Lacking a "green card," * some 13(c) applicants
have not been able to secure employment for which they are quali-
fied and have had to accept work with lower salaries than they
should be able to earn.

' A "green card" is provided aliens who have gotten permanent resident status and facilities
obtaining employment.

401

STATUS ACQUIRED THROUGH PERSONAL WEALTH AND OTHER

FACTORS

The disposition of the cases described above contrasted sharply
with the disposition of applications of other Korean nationals who
gained permanent resident status under sections of the immigra-
tion laws other than section 13. The subcommittee became aware
that many Korean nationals, irrespective of past backgrounds and
need for sanctuary, have obtained permanent resident status with-
out difficulty on the basis of their capital investments in this
country.

Former KCIA director Kim Hyung Wook moved to the United
States in 1973 and settled in New Jersey. Kim was able to obtain
permanent resident status for himself and his family with relative
ease (although he was never employed in the United States). To
assist Kim in his application for permanent resident status, one of
his bankers informed INS that Kim had well over $200,000 on
deposit in the United States.* The subcommittee learned that Kim
had brought millions of dollars out of Korea in violation of Korean
currency laws, and that he had obtained most of his money while
he was a public official in Korea. ^

In 1974, another high-ranking KCIA official, Kim Ki Wan, moved
to Los Angeles where he had earlier settled his family. Kim moved
to United States shortly after the kidnaping of opposition leader
Kim Dae Jung from a hotel room in Tokyo.* The ..subcommittee
received information implicating Kim Ki Wan (who was KCIA
station chief in Tokyo at the time) in the kidnaping; » this informa-
tion confirmed widespread suspicions in Japan that the KCIA had
been involved in the kidnaping. Kim's residence in the United
States enabled him to avoid providing information to Japanese
authorities investigating the case.

In addition the subcommittee learned that Kim Ki Wan served
the KCIA as a "black agent," ^° whose mission was to establish
liaison with a third country intelligence agency operating in the
United States. Despite Kim's highly questionable background, he
and his family obtained permanent resident status apparently
based in part on Kim's private holdings in the United States.
Investigation showed that when Kim settled in the United States
in 1974, his assets here totaled nearly $1 million and that he later
brought in additional funds from abroad. The subcommittee could
not verify the source for this money, which seemed to have been
acquired while Kim was a KCIA official."

Many Koreans interviewed by the staff felt resentment toward
former Korean Government officials like Kim Hyung Wook, Kim
Ki Wan, and others who acquired fortunes while in office and then
transferred their holdings to the United States. The fortunes these

• Letter from Chase Manhattan Bank to the INS, September 1973.

'See appendix C-311.

'See "Part B: Review of Korean-American Relations," p. 42.

'"Investigation of Korean- American Relations,"' hearings before the Subcommittee on Interna-
tional Organizations of the Committee on International Relations, 95th Cong., 1st sess.. Part 1,
June 22, 1977 (hereinafter referred to as "KI-l"), p. 39-42, and Subcommittee staff interviews.

"• A covertly controlled agent.

" By 1978, Kim Ki Wan's assets in this country included five pieces of real estate in the Los
\ngeles area— two homes, two condominiums, and a 16-acre tract of ocean-front property in
Vlalibu; and four automobiles — a Mercedes, a Porsche, a Volvo, and a Cadillac. Between Janu-
iry 1974 and December 1976 Kim had brought over $2 million into the United States from
ibroad.

402

officials were able to acquire and bring to the United States
through questionable means, helped them acquire permanent resi-
dent status without the problems and delays experienced by many
other' Koreans. Ironically, these former KCIA officials, with indica-
tions of corrupt or criminal conduct in their backgrounds, achieved
resident status ahead of persons who could not return to Korea for
fear of KCIA harassment.

Another Korean who obtained resident status with relative ease
was Sun Myung Moon. Moon received his green card on the basis
of his wife's having established residency earlier; she in turn
achieved her status by being listed as an employee of the Korean
Cultural and Freedom Foundation, which was controlled and used
by the Moon Organization. ^^ Once in the United States, Moon
brought hundreds of aliens into the country to do fundraising and
other work in violation of their visa status." Moon's apparent
ability to flaunt INS regulations with impunity, and to use his
organization's resources in the United States to obtain resident
status for himself, can also be contrasted with the difficulties en-
countered by other Koreans, whose return to Korea would have
placed them in great jeopardy.

POLITICAL ASYLUM CASES

In order to apply for political asylum in the United States, an
individual must submit an application to INS and provide docu-
mentation to prove that he has been or would be persecuted if
deported to his country of origin.

After reviewing the application and documentation, INS can (1)
grant asylum outright, (2) classify the application as "doubtful," or
(3) claim that the application is clearly without merit. In the first
instance, INS simply informs the Department of State of its inten-
tion to grant political asylum, giving DOS a chance to respond. In i ^
the second, the INS sends its information to DOS for an advisory
opinion. In the last case, the INS report is sent to DOS and unless
DOS disagrees within 30 days, INS commences deportation proceed-
ings.

A grant of political asylum does not result in approval of perma-
nent resident status; it must be obtained by separate application.
In contrast to the section 13(c) process. Congress has no input in
political asylum cases.

The subcommittee became involved in a case which fell within
the second category of INS political asylum applications. Sungnam
Chang and his wife, Jin Ok Chang, two actively anti-Park Koreans
living in Washington, D.C., applied for political asylum. Jin Ok
Chang had been admitted to the United States in October 1969
under a B-1 (business) visa to serve as a Korean language instruc-
tor for the Peace Corps. In 1972, she married Sungnam Chang, a
Korean in the United States under an F-1 (student) visa. When the
Yushin system was established in Korea in 1972, the Changs spoke
out against ROK Government repression. Mr. Chang founded an
anti-Park Korean-language newspaper in Arlington, Va., called the

*' See the "Moon Organization" in "Part C-V: Educational, Informational, and Cultural Activ- iJ'l-

ities," p. 344-46. *'^

» Ibid.

403

Free Republic. Both he and Mrs. Chang participated in demonstra-
tions against the Park regime held in Washington between 1972
and 1977.

By 1974, the Changs had become targets of KCIA surveillance
and harassment.^* In 1974 and 1975, the Changs received anony-
mous phone calls warning them of physical harm and threatening
that their child would be killed if they did not stop their anti-Park
activities. Around the same time, Mrs. Chang's brother was arrest-
ed in Korea for anti-Park activities; he was imprisoned and tor-
tured. Mr. Chang, fearing for his family's safety should they be
forced to return to Korea, petitioned the INS for political asylum
for himself and his family on July 12, 1974.

It was not until April 1975 that INS requested an advisory
opinion on the matter from the Department of State, and not until
July 27, 1977, that State replied. State did not address the question
of political asylum directly. In its letter to INS, State said it was
unable to substantiate Mr. Chang's fear of persecution; however,
''we have some doubts regarding this case. We therefore believe it
appropriate to err on his side and recommend that Mr. Chang not
be forcibly returned to Korea at this time." ^^ Seven days later, INS
sent the Changs a form letter denying asylum, apparenty because
the Department of State had not used the term "political asylum"
in its recommendation. The INS ordered the Changs to depart from
the United States within 20 days. Because Mr. Chang was hospital-
ized with a serious illness at the time of the denial, INS decided
not to deport the family for 1 year. Two months later, in October

1977, Mr. Chang died.

Meanwhile, an August Washington Post article about the
Changs' difficulty in obtaining asylum prompted subcommittee
staff to contact Mrs. Chang. Even with subcommittee assistance,
Mrs. Chang received ambiguous and inconsistent advice from sever-
al INS officials. She finally turned to an attorney for help. In April

1978, she filed a second petition for political asylum. A legal memo-
randum submitted in support of the petition questioned the legal
basis for the INS denial of the original petition. In June 1978, the
INS granted her application. That same month, Mrs. Chang began
the separate process of applying for permanent residency. As of
this writing, it appeared permanent residency was 2 years away.

It is the stated policy of the State Department to review applica-
tions for political asylum on an individual basis. However, an
article published in the April 1977 issue of Nation magazine con-
cluded that petitions for asylum by individuals from Communist
countries are usually approved automatically, while those from
right-wing dictatorships are rarely successful.^* The asylum case of
the Changs appeared to fit this pattern.

•♦ Mr. Chang was among seven Korean residents in Washington whose actmti^ the KCIA

instructed its Washington station to monitor in 1974 (from testimony by a former KCLA official

I bSore the House CoSmittee on Standards of Official Conduct, "Korean If^^^Jf .J^^^^^^gf-

tion," pt. 1, Oct. 20, 1977; pp. 52-54, 63.) This testimony was made subsequent to the decision by

ins' to deny political asylum to Mr. Chang. r c . * *u t -^o*;^,, o«^

'» Letter stating the advisory opinion of the Department of State to the Immigration and
Naturalization Service, dated July 21, 1977. , , „ xt x- a oa iqt't t;97 j^qh

■• Hanson, Christopher. "Not for Victims of Our 'Friends'," Nation, Apr. 30, 1977, pp. 527-530.

35-508 O - 78 - 27

404

In its response to INS, which was delayed over 2 years, the State
Department failed to consider the extraordinary problem of KCIA
harassment of anti-Park Koreans in this country, a problem which
in 1973 had led the State Department to request that the Korean
Embassy transfer the KCIA station chief out of the United States.
Indeed, the State Department, in its letter of July 27, 1977, stated
that it had no reports of Koreans outside Korea being persecuted
because of political beliefs. Nowhere did State address the fact that
severe suppression of dissent within Korea acted as a deterrent to
repatriation by anti-Park Koreans. At best, this omission reflected
ignorance on the part of the State Department's Office of Refugee
and Migration Affairs. Essentially, State was avoiding acknowledg-
ing the human rights problem in Korea. INS also failed to take
into account the severity of the Changs' concern and even rejected
State's recommendation that the Changs not be forcibly returned
to Korea.

As with the section 13(c) cases, the delay and uncertainty caused
needless additional anxiety to people who sought sanctuary in this
country because of their exercise of legitimate dissent. The subcom-
mittee urges the State Department and INS to consider carefully
all relevant factors in these and similar cases in the future.

CONCLUSIONS AND RECOMMENDATIONS

The subcommittee recognized that many of the delays and in-
equities discussed above were the result of INS' limited resources,
which precluded it from conducting prompt in-depth investigations
of all cases. However, other problems — such as those in the 13(c)
cases — could have been solved or alleviated simply through better
cooperation between the INS and its congressional oversight com-
mittee. The subcommittee also saw the need for legislative reme-
dies for some of the fundamental inequities arising from the INS
statutes and regulations and the manner in which they are en-
forced. Accordingly, this report has been referred to the House and
Senate Judiciary Committees with the recommendation that they
conduct a review of U.S. immigration laws.

The subcommittee specifically recommends that the committees:

(1) Consider legislation to amend 13(c) so as to clarify the
responsibilities of INS and the Congress in passing upon the
applications of foreign diplomats for permanent resident
status.

(2) Review existing immigration laws and procedures to de-
termine whether they are unnecessary, enabling persons who
have acquired wealth through questionable means to obtain
resident status ahead of persons with meritorious claims to
such status.

(3) Evaluate the ability of the INS — under current laws and
procedures — to cope with organized attempts to import aliens
for unlawful purposes. ^^

»' See the "Moon Organization" in "Part C-V: Educational, Informational, and Cultural Activ-
ities," p. 334-336.

PART D

SPECIAL PROBLEMS IN THE CONDUCT OF THE
INVESTIGATION

In conducting the investigation, the subcommittee encountered
various problems which slowed or otherwise affected the work.
With a few exceptions, the outcome of the investigation was not
changed as a result. In the following descriptions of the problems,
the subcommittee has made recommendations which, if acted upon,
could assist future investigations.

I. Attitude of the Korean CjOvernment

Shortly before the subcommittee staff left for an important inves-
tigative mission to South Korea, Pak Tong-chin, South Korea's
Foreign Minister, was quoted by the Korean news service Haptong
as saying "* * * it is beyond common sense for the Fraser panel to
send so-called investigators to a sovereign state for the purpose of
probing into groundless and non-existent stories.^ The same article
reported on a request by Choe Yong-hui, Chairman of the Foreign
Affairs Committee of the National Assembly, that the Govern-
ment—

Take appropriate actions to prevent Rep. Fraser from using any findings from the
upcoming investigation by his committee's staff investigators for his anti-Korean
activities, so that they may not hinder the friendly relations between the two
countries.

In general, the above statements characterized the Government's
attitude toward this investigation: Denying any wrongdoing and
attacking the motives of the subcommittee chairman. Chairman
Fraser and, through him, the investigation were continually criti-
cized by the Korean press (often reflecting the feelings of the
Government) as being "anti-Korean" and therefore incapable of
conducting a fair inquiry. Nevertheless, throughout the investiga-
tion, the subcommittee sought the Government's cooperation.
During public hearings in November 1977, Chairman Fraser made
the following request:

You can greatly assist your ally and the mutual interests of the people of South
Korea and the United States by lending your cooperation to the investigation of
Korean-American relations.^

The Korean Government early indicated its intent not to cooper-
ate. In July 1977, when subcommittee staff attempted to speak
with a U.S. citizen employed at the Embassy in Washington, D.C.,
the Embassy protested to both the Department of State and the
subcommittee. Realizing that similar problems might arise, the
subcommittee asked the Embassy for an opportunity to meet with
the Ambassador to establish procedures for obtaining information
from the Korean Government. The Embassy refused.

Perhaps the most obvious show of contempt occurred prior to
and during the December 1977 staff visit to Seoul. In August 1977,
subcommittee staff obtained \dsas from the South Korean Embassy,
after having briefed the Embassy as to the purposes of the trip. In
November 1977, the subcommittee provided the Embassy with a
list of the Koreans with whom interviews were desired. The list
was also provided to the Department of State for transmittal to the
U.S. Embassy in Seoul. According to the Haptong article dated

' Haptong News Service release, Seoul, Dec. 6, 1977, published translation by Foreign Broad-
cast Information Service. ,01. -j.^ t i.

» Investigation of Korean-American Relations," hearings before the Subconmiittee on Interna-
tional Organizations of the Committee on International Relations, 95th Cong., 1st sess.. Part 3,
Nov. 29 and 30, 1977, p. 103.

407

408

December 6, 1977 referred to earlier, the Foreign Minister, in
response to a question as to why the visas had been issued, said:
"they never stated their purpose of visit as investigation in their
application for visas and therefore, [we] permitted their entry in
accordance with the bilateral diplomatic pact." In addition, he said,
"I have no knowledge of the scheme, investigation, nor have I
known of even the existence of such one."

The Foreign Minister's remarks may have been attributable to
calls in the Korean National Assembly for his removal for having
issued the visas. However, such statements increased the antago-
nism of the Korean press, people, and Government toward the staff
delegation and made it virtually impossible for them to interview
Koreans. This was true for all Koreans on the subcommittee's list.
One potential interviewee told the staff that he had to decline the
interview on orders from his Government.

The lack of cooperation continued into 1978. On January 28, the
Seoul radio report quoted Korean Ambassador to the United States
Kim Yong Shik stating: "should Park Tong-sun testify before Con-
gress, he would do so before the House Ethics Committee only, not
before other committees, including the Fraser committee." ^ Shortly
thereafter, the Ambassador asked the House leadership for assur-
ances that the subcommittee would not question Park. Realizing
that the situation might jeopardize the investigation of the House
Committee on Standards of Official Conduct, Chairman Fraser
agreed. The subcommittee was able to question Tongsun Park
during his second trip to the United States, but only after agreeing
that he would neither be subpenaed nor questioned under oath.

The reason the Korean Government did not want the subcommit-
tee to question Park was never explained. Presumably it was be-
cause the subcommittee's investigation had a broader mandate
than that of the ethics committees and might have implicated
other Korean officials. In fact, Park refused during staff interviews
to identify Korean officials who had received rice commission
money from him. He stated that to do so would endanger his
livelihood.

On January 11, 1978, Chairman Fraser wrote to the Korean
Ambassador and requested, in part:

We would like to offer an opportunity for the CSrovemment of the Republic of
Korea to contribute to * * * hearings either by submitting a \vTitten statement to
the Subcommittee, as was submitted by the Embassy to this subcommittee and the
Subcommittee on Asian and Pacific Affairs on July 30, 1974; or by suggesting a
suitable witness to testify who would be familiar with concerns and interests of your
government during the period 1968-1972.*

Ambassador Kim Yong Shik's reply, dated February 24, 1978,
stated:

* * • I wish to inform you that my government has no plan to submit a written
statement or suggest a witness for the hearings at this time. However, we would not
consider it inappropriate to express our views in these matters should it be neces-
sary in the future.'

' Seoul Domestic Service broadcast of Jan. 28, 1978, published translation by Foreign Broad-
cast Information Service.

♦Letter from Hon. Donald M. Fraser, chairman, Subcommittee on International Organiza-
tions, to Kim Yong Shik, Ambassador of the Republic of Korea, dated Jan. 11, 1978.

* Letter from Kim Yong Shik, Ambassador of the Republic of Korea, to Hon. Donald M.
Fraser, chairman, Subcommittee on International Organizations, dated Feb. 24, 1978.

409

The Government did express its views later, by denouncing the
findings of the hearings as false. At no time did the Korean Gov
emment alter its attitude of hostile noncooperation.

410

II. The Japanese Attitude Toward the Investigation

Geographical proximity has resulted in a long history of interac-
tion between Japan and Korea, both hostile and friendly. Japan
also has been a major factor in relations between the United States
and the Republic of Korea, and normal relations between the two
has been a high priority of U.S. foreign policy. A major considera-
tion in America's commitment to defend South Korea has been
Japan's security. In recent years, Japan and Korea have experi-
enced a mutually beneficial economic relationship, and the United
States and Japan are South Korea's biggest trading partners. Thus
in several important ways, a trilateral relationship exists among
the three countries.

Numerous Japanese, notably Members of the Diet and journal-
ists, urged that the subcommittee not limit its investigation to
bilateral relations between the United States and South Korea.
They asserted that answers to some important questions in
Korean-American relations could be found in Japan, and they al-
leged wrongdoing in Korean-Japanese relations as well. In particu-
lar, they asked for an investigation of the circumstances surround-
ing the abduction of South Korean politician Kim Dae Jung from a
Tokyo hotel in 1973, and his subsequent appearance in Seoul in the
custody of the Korean Government.

The subcommittee staff determined that to investigate Japan's
relations with the United States or South Korea would exceed its
mandate. Nor did it undertake an investigation of the Kim Dae
Jung kidnaping beyond determining that the KCIA was responsible
and that no Americans were involved.

When the members of the staff undertook an investigative trip to
Seoul, they stopped over in Tokyo. The Japanese Government,
citing considerations of national sovereignty, issued visas on the
condition that the staff interview only American citizens. This
restriction prevented the staff from interviewing several Japanese
and Korean residents of Japan who wished to speak with them.
Futhermore, when the staff arranged a voluntary interview with
an American businessman, to take place within the U.S. Embassy,
the Japanese Government initially objected, taking the position
that the agreement under which the visas had been issued limited
interviews to U.S. officials.

The U.S. Government, on the other hand, imposed no such re-
strictions when Members of the Japanese Diet traveled to the
United States seeking information on the kidnaping of Kim Dae
Jung. In the course of their inquiries, the Diet Members and their
staffs interviewed American citizens and Korean residents of the
United States at several locations around the country. Two Diet
Members were in the United States on such an inquiry during the
time that subcommittee staff was visiting Japan and Korea.

411
ni. Intransigence of the Moon Organization ^

The subcommittee became interested in certain activities of Sun
Myung Moon and his associated organizations after receiving alle-
gations of links to KCIA activities in the United States, attempts to
buy a controlling interest in an American bank, and manufactur-
ing of weaponry for the Korean Government.

The hostility of some components of the Moon Organization, such
as the Unification Church (UC), created special problems for the
investigation. Followers of Moon not only refused to cooperate on a
voluntary basis, but also resisted inquiries put to them under sub-
pena, absented themselves from the (jnited States in order to avoid
service of subpenas, conducted well-financed and organized propa-
ganda campaigns against Chairman Eraser personally and the in-
vestigation itself, and filed a $30 million lawsuit against Chairman
Fraser and two members of the investigative staff. From the outset,
representatives of the UC and other Moon Organization compo-
nents charged the subcommittee, and in particular its chairman,
with violation of First Amendment rights to freedom of religion
and association.

These charges were first made long before the Investigation of
Korean-American relations began in April 1977. Early in 1976, the
subcommittee began inquiring into the source of funding for the
Diplomat National Bank (DNB), which had opened in Washington
in December 1975. The inquiry was prompted by information indi-
cating that associates of Tongsun Park and Sun M)aing Moon
together held a controlling interest in the bank. Representatives of
the UC and the DNB joined at that time in denouncing the inqui-
ry, describing it with epithets such as "McCarthyism" and "smear
tactics." In testimony before the subcommittee that year, UC Presi-
dent Neil Salonen asserted First Amendment "associational" rights
to avoid answering questions about the source of funds for DNB
stock purchases and the persons involved in coordinating those
purchases. Salonen claimed that, as far as he knew, the UC was
not involved in any way in providing funds for those purchases.
The subcommittee found that the UC was involved in over $1
million of the original stock purchases.

In August 1977, another UC official, Daniel Fefferman, refused
to answer questions about political activities in support of former
President Nixon during the impeachment proceedings, again as-
serting as grounds ''freedom of religion and association." In Febru-
ary 1978, Pak Bo Hi, Moon's aide and interpreter, appeared before
the subcommittee and gave First and Fifth Amendment rights as
grounds for refusing to answer questions put to him. Pak later
abandoned his First Amendment claims after receiving immunity
from criminal prosecution.

Pak Bo Hi's testimony before the subcommittee in 1978 was
accompanied by an extensive propaganda campaign designed to
discredit the investigation and the subcommittee chairman. UC-
financed camera crews filmed the hearings; these films were edited
to produce documentaries aired on TV stations in Korea. Pak and
other UC members circulated literature accusing the subcommittee

•The subcommittee concluded that the various organizations associated with Sun Myung
Moon constituted one group, which it designated the Moon Organization. See "The Moon
Organization" in "Part C-V: Educational, Informational, and Cultural Activities," p. 313.

412

chairman of working for the Soviet Union; other literature made
disparaging comments about his wife and children.

Organized propaganda activities by the UC, including attempts
to link the subcommittee chairman with Communism, had begun
in the summer of 1977, with the goal of stopping the investigation.
Activities included visits by UC members to congressional offices;
mass mailings to the press, clergy, legal professionals, and other
influential persons and organizations; professionally prepared ads
in newspapers; and wide use and circulation of UC-controlled publi-
cations such as News World and The Rising Tide. Public response
was overwhelmingly in favor of the investigation, but subcommit-
tee members and staff still had to devote a great deal of time to
responding to the charges, accusations, and activities. The lawsuit
against the subcommittee chairman and two staff members was
part of the Moon Organization's overall propaganda campaign. UC
representatives also announced suits against the New York Times
and the U.S. Department of State in connection with matters aris-
ing out of this investigation.

Many persons with information about the Moon Organization
expressed fear that they would be harassed with lawsuits if they
spoke to the subcommittee. This fear resulted in part from the
perception that the UC has unlimited financial resources to pursue
legal actions, frivolous or otherwise, against any person or organi-
zation threatening it.

The unavailability of witnesses was a major problem in investi-
gating allegations about the Moon Organization. Many UC mem-
bers were out of the country or could not be located. Others, who
were living in groups on UC compounds, had the same lawyers and
appeared to be under the centralized direction and control of Moon
and other high-ranking UC figures. Almost without exception, they
would not consent to voluntary interviews.

Sun Myung Moon also declined to appear voluntarily. As a
result, in May 1978, the subcommittee notified him through his
attorney that it was considering serving him with a subpena to
require his attendance at public hearings in June. He was given
until May 15 to respond. On May 13, Moon left for London, using a
plane reservation made 2 days before under another name. Despite
public announcements by UC members that he would return to the
United States and contest the subpena in court, he had not done so
by the end of the investigation.

Some of the problems created by the attitude of UC members
and officials were unique to this investigation and not likely to be
repeated. Others, like the claims of First and Fifth Amendment
rights, raised issues that are likely to recur. The subcommittee
regarded some of the claims of privilege as spurious and designed
to thwart legitimate inquiries, but the subcommittee recognizes
that a court is the proper forum for the adjudication of such issues.
However, under current law, there is no vehicle by which a court
can rule on the validity of a claim of constitutional privilege prior
to the initiation of a contempt action. The subcommittee's experi-
ence with recalcitrant UC members was a factor leading to its
recommendation that Congress adopt legislation creating civil rem-

413

edies for the enforcement of congressional subpenas.^ The subcom-
mittee also believes that adoption of the changes in House rules
and procedures discussed earlier in this report^ would enable
future congressional investigations to deal more effectively with
the kinds of problems created by hostile or evasive groups such as
the Moon Organization.

^See "Part D-IV: House Rules and Procedures," p. 415.
» Ibid., p. 414-416.

414
IV. House Rules and Procedures

It became apparent that the investigation was being hampered
by certain House Rules and Regulations of the Committee on
House Administration. These rules were designed for and are more
suitable to the traditional legislative work of committees. Some
examples of the problems faced in the course of the investigation
due to these regulations, or lack of them, are enumerated below.

TRAVEL

Under House Rule XXXV, a committee can only pay travel
expenses and per diem to witnesses who formally testify before it.
However, in an investigation it is often necessary to bring an
individual to Washington for less than formal testimony. The staff
of this investigation preferred to talk with persons informally
before making recommendations on the need for formal testimony.
Because of House Rule XXXV, funds were not available for this
purpose; consequently the subcommittee had to send staff into the
field. Since proper investigative procedures call for two investiga-
tors at each interview, this proved to be a costly system and re-
quired the authorization of additional travel funds.

The problem was particularly severe with respect to interviews
with current or former Government officials living outside the
Washington area. Many of these interviews dealt with classified
subject matter, and the personnel and agencies involved would
have preferred the questioning to have taken place in Washington.

The subcommittee recommends that House procedures be amend-
ed to allow investigative committees to pay travel expenses and per
diem for persons to be interviewed who are being considered for
testimony before such committees.

QUORUMS

Quorums are required for a niLimber of committee actions. House
Rule XI2(h)(l) provides that "Each committee may fix the number
of its Members to constitute a quorum for taking testimony and
receiving evidence which shall not be less than two." House Rule
XI2(k)(5) states that "if the committee determines that evidence or
testimony at an investigative hearing may tend to defame, degrade,
or incriminate any person, it shall receive such evidence or testi-
mony in executive session." In order to close a meeting for execu-
tive session testimony, that same rule requires that a vote be taken
in open session, with a majority of the members present.

The above procedures were inappropriate for investigative work.
An investigative committee is apt to take much of its testimony in
executive session due to the sensitive nature of the work. The tight
and conflicting schedules of members made it difficult to obtain the
necessary quorum to close hearings. Further, maintaining the nec-
essary quorum to two was difficult — especially where witnesses
required many hours, in some cases, days of closed session ques-
tioning.

415

NEED FOR ONE-MEMBER DEPOSITION AUTHORITY

The International Relations Committee, at the behest of the
subcommittee, adopted a resolution asking the House of Repre-
sentatives to give the subcommittee the authority to compel any
person, from whom a member of the subcommittee wished to take
a deposition, to appear at any place within or outside the United
States. All members of the subcommittee would be given advance
notice of that time and place. The resolution was referred to the
House Rules Committee, but was never considered.

The subcommittee recommends that future congressional investi-
gations be granted the authority to compel depositions before a
single member, and that House Rule XI2 be amended to permit a
committee which is conducting an investigation to establish one
member as its quorum for taking testimony.

SWORN STATEMENTS

On several occasions, witnesses voluntarily gave sworn state-
ments to the staff. Their statements were either oral or written,
with a notary public giving the oath. While this procedure saved
time, it was of questionable value because it is not addressed in the
House Rules.

The subcommittee recommends that the House Rules make clear,
either by amendment or interpretation, that staff members of in-
vestigative committees are authorized to take voluntary sworn
statements.

SUBPENA POWER

The subcommittee's subpena power derived from House Rule
XI2(mXl) amd the resolution adopted by the Committee on Interna-
tional Relations on February 3, 1978, which authorized the investi-
gation. While the power to issue subpenas was clear, there were no
guidelines for serving them. The House generally seems to follow
Federal rules. Fortunately, the subcommittee was not faced with
any court action based on improper service. Had the situation
arisen, however, a legal position might have been difficult to de-
velop, given the absence of House Rules.

The subcommittee recommends that the House institute rules
governing the service of subpenas.

SUBPENA ENFORCEMENT AND CONTEMPT POWER

There is no existing statute authorizing Congress to seek and
obtain judicial enforcement of subpenas, or providing civil remedies
in the case of a witness who commits contempt during a congres-
sional proceeding.

During the investigation, one witness before the subcommittee
refused to answer questions during a hearing on the grounds that
the questions infringed certain constitutional rights. Under current
laws and procedures, the subcommittee's only practical recourse
was to seek to have the House vote to hold the witness in contempt
of Congress, and make a referral to the U.S. attorney for the
District of ODlumbia for criminal prosecution.

This process is unwieldy and time-consuming and is designed to
punish the witness rather than to provide Congress with the infor-

416

mation it seeks. From the standpoint of a witness with a valid legal
argument against providing information sought by Congress, cur-
rent procedure prevents a judicial determination of the merits of
the claim until after the witness has been subjected to contempt
citation,, and possibly criminal prosecution.

In order to give Congress greater flexibility in the enforcement of
subpenas and in dealing with recalcitrant witnesses, while at the
same time preserving the existing option of seeking a criminal
prosecution, the subcommittee recommends that the House adopt
legislation providing for the civil enforcement of congressional sub-
penas. In 1977 the Senate passed a bill (S. 555), which contains a
provision for the civil judicial enforcement of congressional sub-
penas. The subcommittee urges the adoption of this or an equiva-
lent bill in the House.

COSTS FOR REPRODUCING DOCUMENTS

There are no provisions in rules and regulations of the Commit-
tee on House Administration to pay for reproduction of documents
which have been obtained through a subpena duces tecum. The
expense of collating and copjdng these documents can be very high.
Several requests were received by the subcommittee to pay rele-
vant expenses.

The subcommittee recommends that the House address the issue
of payment for the reproduction of documents which have been
obtained through a subpena duces tecum.

417
V. Difficulty of Tracing Financial Transactions

The subcommittee was confronted with three tasks in tracing
financial transactions: (1) Identifying sources of wealth and current
income for several persons and organizations who figured in the
investigation; (2) identifying funding for activities believed to be
covert operations of the ROK Government in the United States;
and (3) verifying allegations that U.S. corporations doing business
in Korea made substantial political payments to officials of the
Korean Government as a condition for doing business.

The task of examining the personal holdings of persons who
figured in the investigation was necessary because in the case of
two witnesses, Kim Hyung Wook and Pak Bo Hi, the size of their
fortunes and source of current income bore directly on matters to
which they testified before the subcommittee. More generally, in
the case of others whose activities were investigated by the subcom-
mittee, relationships among them were revealed that might other-
wise not have been apparent. Some relationships tied them to
lobbying activities of interest to the subcommittee which are de-
scribed in other sections of this report.^

The subcommittee encountered substantial problems in tracing
financial transactions. For example, bank account records in
Korean banks were obvious sources of information that would have
allowed the subcommittee to determine the sources of the fortunes
of Korean officiads and of funds used for ROK Government oper-
ations in the United States, as well as those of other organizations
that figured in the subcommittee's investigation. However, Korean
bank records are beyond the reach of U.S. subpenas.^^ The investi-
gation was therefore forced to rely largely on records of deposits
and withdrawals of funds in U.S. bank accounts.

Even in instances where suspected operatives were supplied with
funds through U.S. bank accounts, tracing these funds, both their
source and use, was a difficult process at best for two reasons.
First, funds can be brought into the United States either through
the diplomatic pouch (and placed in U.S. bank accounts as untrace-
able deposits) or wired into U.S. bank accounts through a series of
transfers among banks overseas that can be quite complicated.
Staff investigators received information that both methods were
used. Various financial trails of funds wired through banks ended,
from the investigation's point of view, either back in Korean banks,
in correspondent accounts of Korean banks in foreign countries, or
in banks in countries protected by bank secrecy laws such as
Switzerland or Singapore.

Second, tracking payments to suspected operatives from U.S.
accounts required following a trail of bank checks or pajonents
wired into secondary accounts that by a variety of devices were
made to appear to be legitimate business transactions.

With respect to the inaccessibility of foreign bank records, the
subcommittee understands that certain executive branch agencies
such as the Internal Revenue Service and the Federal Bureau of

« See "Part C-HI: Executive Branch Awareness of Questionable Korean Activities" and "Part
C-V: Educational, Informational, and Cultural Activities." . x , o^ ,.^^i .xt

» Law for Protection of Privacy on Deposits, Installment Deposits, Etc., of July 29, 1961 (No.
668) as amended Jan. 13, 1971, Law No. 2278; Korean Finance Minister Directive Re: Protection
of Deposits Privacy, May 16, 1977.

418

Investigation occasionally receive cooperation from bank officials.
The same was not true for the subcommittee. In the case of those
agencies, the cooperation is based upon long-standing relationships
with officials in those countries and the ability of U.S. agencies to
reciprocate in providing information about persons under investiga-
tion in foreign countries.

In 1973, the United States signed a treaty with Switzerland
which provides for ''mutual assistance in criminal matters" be-
tween the two countries. However, the language of the treaty re-
stricts this mutual assistance chiefly to matters concerning orga-
nized crime. The treaty provided formal procedures for the U.S.
Government to acquire bank account information from Swiss banks
and certain kinds of commercial and court records from Swiss
Government agencies. The provisions for acquiring this informa-
tion, however, do not extend to the Congress. Congress' ability to
get protected bank account information from any foreign country is
more limited, therefore, than that of the executive branch. Under
normal circumstances however, it is the exective branch, not the
Congress, which pursues allegations of U.S. tax, immigration, and
foreign agent registration law violations.

Despite the various difficulties in tracing the transactions, the
subcommittee was able to identify some methods used by Korean
Government officials or its agents to acquire and transfer funds out
of Korea. Some of these techniques are summarized below.

(1) Korea's strict currency control laws place all foreign exchange
transactions made by Korean and foreign nationals under the su-
pervision of the Ministry of Finance and the Bank of Korea. Pay-
ments to and from nonresidents (including Korean expatriates) are
expressly forbidden, as are receipt of payments of behalf of nonresi-
dents and tranfers of funds in Korean bank accounts on behalf of
nonresidents. With very few exceptions, all proceeds from foreign
exchange transactions must be surrendered to the Korea Exchange
Bank or other designated foreign exchange bank against payment
in won, or must be converted into equivalent foreign exchange
certificates.

To get around these regulations, Korean agents or sales repre-
sentatives of American corporations doing business in Korea direct-
ed the companies to make commission payments owing the agents
to third parties here in the United States, rather than remitting
the payments to the agents in Korea. In effect, the corporations
were used by their Korean employees or consultants as financial
institutions for transferring funds to the United States. Persons
who had amassed wealth while in office in Korea were able to
acquire dollars for won in an exchange that left no trail, even in
Korea.

In the case of Kim Hyung Wook, by arranging such funds trans-
fers for himself through the use of the bank accounts of small
American companies belonging to his associates, he was able to
withdraw money from Korea in violation of the stringent currency
control regulations he himself helped administer as Director of the
KCIA. By virtue of this device, it was impossible for the subcom-

419

mittee to determine absolutely who the Korean payers were in
Kim's case as well as in others.'

This method of circumventing foreign exchange reporting and
controls was also used by the Korean Central Intelligence Agency
to enable it to fund operatives abroad through proprietary compa-
nies in a manner that kept the payments and identity of the
recipients a closely held secret.

(2) The funds for the Diplomat National Bank stock purchases
arranged by Pak Bo Hi amounted to over $1 million. They appar-
ently involved a second method of transferring funds international-
ly. Pak testified that the source for the bulk of the cash was the
Unification Church's pension fund in Japan. According to his testi-
mony, the funds were brought in piecemeal in cash over several
years, although his testimony could not be corroborated by refer-
ence to the Treasury's International Currency Transaction Reports
required by the Bank Secrecy Act. The subcommittee also exam-
ined his personal bank account records, the records of the founda-
tion he administers, and various Unification Church bank ac-
counts, none of which revealed massive withdrawals of cash. If
funds for the purchase of the stock were brought into the United
States in any sums larger than $5,000 and were not reported to the
Treasury, the importation of this cash may have been illegal under
U.S. law.

The subcommittee found it impossible to verify Pak's explanation
of how he financed his own stock purchases. He stated that the
funds came from Mitsuharu Ishii, an officer of the Unification
Church in Japan, who, according to Pak, had loaned him $223,000
between 1972 and 1974, which Pak said he used to make business
investments. As evidence of these loans, he produced three promis-
sory notes dated Februry 15, 1972, October 9, 1972, and November
19, 1974. Two were made out to Ishii as "President, Unification
Church Pension Fund International." All of the notes stated that
the loans were for a maximum term of 10 years without interest
and with no provision for collateral.* Under questioning, Pak ad-
mitted that he had signed all three promissory notes in 1978 * and
that, in addition, he had failed to list the first two of these loans as
liabilities in an application for a bank loan in late 1972.«

Although Pak said he had known Ishii for years, he did not know
where Ishii got the money to lend him $223,000 or whether it came
from the pension fund:

Mr. Phaser. Colonel, you were the one who instructed Mr. Ishii to set up the
pension fund; isn't that right?

Mr. Pak. Yes.

Mr. Phaser. Are you saying now you borrowed a total of several hundred thou-
sand dollars from him and you don't know whether the money came from that
pension fund or not?

Mr. Pak. No, sir.

Mr. Phaser. You do not know?

Mr. Pak. No, sir.'

•See "Part D-VI: Special Problems With Tongsun Park, Kim Hyimg Wook, and Kim Ki
Wan," pp. 421-424.

♦ KI-4, pp. 278-292; 315-330.

* Ibid.

• "Investigation of Korean-American Relations," hearings before the Subcommittee on Inter-
national Organizations of the Committee on International Relations, 95th Cong., 2d sess.. Part 4,
Mar. 15, 16, 21. 22; Apr. 11, 20; and June 20, 1978, p. 294.

' KI-4, p. 324.

35-508 O - 78

420

(3) Results of the subcommittee's investigation of corporate pay-
ments to ROK Government officials in Korea are treated in more
detail elsewhere in this report,® but two more devices for the trans-
fer of funds that came to the subconmiittee's attention in that part
of its investigation are worth mentioning here. One was to make
overpayments to sales representatives and consultants of the com-
panies in Korea, who then transferred the excess funds to Grovem-
ment officials or to the Democratic Republican Party through its
fundraisers. This form of payment usually occurred over a period
of time and, in at least two cases known to the subcommittee, was
associated with contract overbilling procedures whereby the pay-
ments of ROK Grovemment officials were built into negotiated
contracts. Sometimes these payments were made directly to sales
representatives and consultants; other times payments were made
through loint-venture companies partly owned by American firms
and pautly owned by Korean nationals or the Korean Government.

The second device, associated with demands for lump-sum contri-
butions to political funds in Korea, was the establishment by
American corporations of Swiss bank accounts in the names of
persons designated by Korean officials. Funds fi-om the account
were eventually withdrawn from the bank in cash and were
untraceable.

• See "Problems of Political Funding and U.S. Trade and Investment in Korea" in "Part C-IV:
Economic Relations, pp. 225-258.

421

VI. Special Problems With Tongsun Park, Kim Hyung Wook,

AND Kim Ki Wan

Early in the investigation, the subcommittee identified three
Koreans— Tongsun Park, Kim Hyung Wook, and Kim Ki Wan— as
potential witnesses with knowledge of matters important to the
investigation. Complete and truthful cooperation from these men
would have been of great benefit. However, the subcommittee's
experience with each was less than satisfactory, with the result
that some questions remained unanswered at the end of the inves-
tigation.

TONGSUN PARK

Park received more attention from the media than any other
figure in the Korean influence scandal. Most of the publicity and
investigative effort focused on Park's dealings with Members of
Congress. Since he was an important witness in the investigations
of bribery being conducted by the Department of Justice and the
House and Senate ethics committees, the subcommittee decided to
take no action which would jeopardize those inquiries. As a result,
the subcommittee was only able to gain access to Park for informal
questioning late in the investigation, and even that questioning
was limited as to scope and subject matter.

The subcommittee became interested in Tongsun Park in 1976, in
the course of hearings on KCIA activities in the United States.
Park's relations with Congressmen, Senators, and executive branch
officials, his alleged role as a KCIA agent, and his purchase of
stock in the Diplomat National Bank were all topics of interest to
the subcommittee at that time. In August 1976, the subcommittee
received subpena powers for its KCIA inquiry and planned to issue
a subpena to Park. In deference to the Justice Department's stated
desire that no subpena be issued until its investigators had a
chance to secure Park's voluntary cooperation, the subcommittee
postponed its plans for a subpena. Two months later. Park left the
United States, thereby placing himself beyond the reach of both
the subcommittee and the Justice Department. He did not return
until 1978 when — after protracted negotiations — an agreement was
reached which required him to testify in the Justice Department's
grand jury investigation in exchange for immunity from prosecu-
tion.

Before Park's return to the United States pursuant to this agree-
ment, the subcommittee authorized a subpena for his appearance,
to be issued in the event he refused to cooperate voluntarily. How-
ever, the Korean Grovernment expressed a strong desire that Park
not be made available to the subcommittee, and there were indica-
tions that if he were subpenaed, the agreement by which he was to
return to the United States and discuss his payments to Congress-
men might be jeopardized. Accordingly, the subcommittee chair-
man agreed to wait until Park's second trip to the United States to
take steps to question him.

After testifying before the House and Senate ethics committees
and the grand jury in March and April 1978, Park returned to
Korea. He came back to the United States in the summer of 1978
for further questioning. Amid continuing indications that service of

422

a subpena would endanger Park's cooperation with the ethics com-
mittees and the Justice Department, the subcommittee chairman
agreed to take an informal statement in lieu of an appearance
under subpena. Park cleared this agreement with the Korean Gov-
ernment.

In his Ethics Committee testimony, Park admitted to making
payments to Korean Government officials. When the subcommittee
staff attempted to question Park about the details of those pay-
ments and their possible relation to Park's dealings with U.S.
firms, he refused to answer, citing difficulties he would encounter
with the Korean Government if he were to discuss such matters.
Park's reluctance to discuss his dealings with Korean officials cut
off important areas of inquiry. In addition. Park's obvious fear of
Korean Government reprisal, coupled with his implausible denial
that he had collaborated in ROK Government influence schemes,
made much of his testimony suspect.*

KIM HYUNG WOOK

Kim was Director of the KCIA from 1963 until 1969 and a
member of the Korean National Assembly from 1971 until 1973. In
1973, having been ousted from the Government, he moved to the
United States, where he and his family set up residence in New
Jersey. The subcommittee sought cooperation from Kim Hyung
Wook during its 1976 investigation of KCIA activities. Although he
granted interviews, he refused to testify, and there were indica-
tions that he was not revealing all that he knew about KCIA
activities and ROK influence schemes in the United States.

On June 5, 1977, the New York Times printed a lengthy article *
quoting Kim as sajdng that he had used Tongsun Park as an agent
while KCIA director, and naming persons as having been KCIA
operatives in the United States. After these public disclosures, Kim
agreed to testify before the subcommittee. During his appearance
on June 22, Kim Hyung Wook gave his views on Korean-American
relations and testified about his knowledge of Tongsun Park, the
Unification Church, Radio of Free Asia, the Research Institute on
Korean Affairs, Hancho Kim, the kidnaping of Kim Dae Jung, and
other matters.^ On several subjects he disavowed statements attrib-
uted to him in the New York 'Times article.

In response to a question from Congressman Goodling about how
he brought his wealth into the United States, Kim said, "Since I
am not a man of wealth there wasn't much to be taken with me." *
He also testified that it took 2 years for him to bring $150,000 out
of Korea because of the limitations of the black market. He said
that since arriving in the United States he had not engaged in
business activity and summarized his life since entering the United

' See Park's testimony, "Korean Influence Investigation, Part 2," hearings before the Commit-
tee on Standards of OfTicial Conduct, 95th Cong., 2d sess., Apr. 3, 4, 5, 10, and 11, 1978, p. 11.

*See "Investigation of Korean- American Relations," hearings before the Subcommittee on
International Organizations of the Committee on International Relations, 95th Cong., Ist sess.,
Part 3, Nov. 29 and 30, 1978 (hereinafter referred to as "KI-3"), appendix 2, p. 139.

* See "Investigation of Korean-American Relations," hearings before the Subcommittee on
International Organizations of the Committee on International Relations, 95th Cong., 1st sess.,
Part 1, June 22, 1977 (hereinafter referred to as "KI-1").

♦ KI-1, p. 43.

423

States in the following words: "My life here is to self-reflect, to
study and cultivate myself, and so forth." *

In a staff interview on July 11, 1977, the transcript of which was
published as an appendix to the hearing of June 22, General Kim
asserted that he had never received any money from Tongsun Park
or been offered money by Park. He also said that, while he was
KCIA director, he received $750 to $1,000 a month for his services
and that this was the only public money he ever took. Beyond this
public allowance, he received only small amounts of money for
living expenses from two or three private individuals, according to
his statement. He said, "I never received a large sum of money
from anybody." *

Kim Hyung Wook's original testimony served to crystallize a
number of issues in the investigation and provided leads which
were verified through other sources. Most of the information he
provided, insofar as it could be checked, proved to be accurate as
far as it went. However, Kim's testimony stirred controversy in the
Korean-American community and drew heavy criticism from the
ROK Government. Much of this controversy arose from Kim's per-
sonal reputation; many Koreans saw him as a harsh KCIA director
who had acquired a fortune while in office and managed to take it
to the United States. The subcommittee continued to hear vague
accusations that he had brought a great amount of money into this
country, but there appeared to be no specific evidence contradicting
the public assertions he made about his finances.

In September 1977, Sohn Ho Young, the KCIA station chief in
New York, left the KCIA and agreed to provide information to the
subcommittee. Sohn's testimony in November revealed an intricate
series of negotiations between Kim Hyung Wook and the ROK
Government both before and after General Kim's testimony before
the subcommittee, and showed that the ROK Government had
attempted to prevent or at least modify Kim's testimony. Sohn
expressed his own feelings about these negotiations in the following
words:

Earlier this year the Government of South Korea was telling the people of South
Korea that Kim Hyung Wook, a former director of the KCIA * * ♦ was a traitor to
the nation for making public statements in the United States against the South
Korean Government. The Government was also denouncing him as a thief for
sending money out of South Korea illegally. But at the same time, the Park regime
continued to negotiate with Kim Hyung Wook. I was aware of the details of these
negotiations.^

Sohn did not know whether Kim actually withheld or modified
anything in connection with his testimony and there was no evi-
dence that he did; however, information provided by Sohn once
again brought Kim's affairs under close scrutiny and he was inter-
viewed again by the staff. In January 1978, General Kim was
arrested and convicted on a guilty plea of smuggling $64,000 into
the United States from Europe. Shortly after that arrest, the sub-
committee also learned that $16,000 in payments to "Porkchop"
(listed in Tongsun Park's ledgers) were payments made to Kim.
These discoveries led the subcommittee to launch a detailed inves-
tigation into Kim's finances which lasted several months.

» KI-l, p. 43.
• KI-1, p. 68.
^ KI-3, p. 6.

424

Numerous bank records were subpenaed and examined, and the
staff interviewed a number of persons familiar with various aspects
of his financial affairs. Initially, he admitted to the staff that he
had brought only a total of $2.6 million into the United States and
that that sum represented his total fortune at its height before it
was reduced by half in gambling losses. However, there were indi-
cations in bank memoranda that Kim's fortune might have
amounted to as much as $15 to $20 million in United States and
foreign bank accounts; that he maintained $4 to $6 million alone in
offshore time deposits managed by his New York bank; that he
continued to bring funds out of Korea through the use of friends'
business bank accounts; and that such funds were being remitted
to him as late as June 1977.

Kim also admitted receiving $750,000 during his tenure as KCIA
director from S. K. Kim, then finance chairman of the Democratic
Republican Party (DRP). He further admitted that S. K. Kim re-
ceived the money from funds donated to the party. Evidence devel-
oped in this and other investigations showed that S. K. Kim had
participated in extorting funds from American corporations doing
business in Korea.

These findings appeared to contradict General Kim's earlier as-
sertions that he was not a man of wealth, that he brought only a
modest sum of money out of Korea, that he took only a legal
monthly allowance in public money and never received a large
amount from anyone, and that he has engaged in no specific busi-
ness since entering the United States but instead has been pursu-
ing a life of study and reflection.

In executive session testimony in July and August 1978, General
Kim discussed his finances and several other subjects.® The details
revealed about his finances and the varying levels of candor in his
dealings with the subcommittee continued to raise questions about
how fully he revealed his knowledge of the matters under investi-
gation.

KIM KI WAN

In testimony on June 22, 1977, Kim Hyung Wook named Kim Ki
Wan and others as the KCIA officers involved in the August 1973
kidnaping of Korean opposition leader Kim Dae Jung.^ At the time
of the kidnaping, Kim Ki Wan was KCIA station chief in Tokyo.
Earlier he had been in charge of the KCIA's pyschological warfare
bureau. The subcommittee had reason to believe that Kim Ki Wan
had knowledge of such matters as the establishment of Radio of
Free Asia, extortion of money from U.S. companies, and KCIA
influence activities directed at U.S. officials.

The subcommittee learned that Kim Ki Wan came to live in the
United States within months after the Kim Dae Jung kidnaping.
He and his family obtained permanent legal resident alien status
and settled in the Los Angeles area. Although ostensibly he had
left the KCIA, there was reason to believe that he was still engaged

• Op. cit., KI-1, pp. 39-42; pp. 64-65; appendix 2, p. 71.

425

in covert KCIA activities in the United States involving contact
with a third country foreign intelligence agency.

The subcommittee staff made strenuous efforts to locate Kim and
in the process learned that Kim — like Kim Hjoing Wook — had
amassed a fortune exceeding $2 million, part of which he had
invested in real estate in southern California. The source of his
wealth was undetermined.

In early 1978, the subcommittee learned that Kim Ki Wan had
traveled to Korea to avoid being questioned by U.S. investigators.
Once in Korea, Kim was placed under virtual house arrest by the
ROK Government and not allowed to leave the country, while his
family stayed in the United States. Kim remained inaccessible to
U.S. investigators.

PART E

ACTIVITIES OF INFLUENCE BY FOREIGN
GOVERNMENTS

In the absence of clearer guidelines from the executive branch,
this section attempts to describe activities of influence by foreign
governments in the United States which are acceptable, and those
which are illegal, with reference to relevant U.S. laws.

INTRODUCTION

Every nation attempts to persuade other nations that its policies
are right. In turn, its policies are influenced in varying degrees by
those of other nations. The act of persuasion need not be confined
to government. In a democracy such as the United States, public
policy is affected by many elements. Foreign governments may
address their arguments to whichever elements might have influ-
ence on U.S. policy, consistent with regulations governing diplo-
matic activities and behavior.

Quite frequently, foreign governments use nondiplomatic persons
to conduct activities designed to influence U.S. officials and the
American public. These persons are required to identify that they
are acting on behalf of a foreign government, and their activities
must conform to various laws of the United States.

Questions of impropriety and illegality arise largely from a fail-
ure to make that identification and from the conduct of covert
activities that are clearly not in accordance with U.S. law. The
subcommittee's investigation has been to a large extent devoted to
determining whether certain unregistered persons were in fact
acting as agents of the Korean Government and whether the ac-
tions of the Korean Government and its officials or agents con-
formed to U.S. laws.

The allegations which were investigated suggested extralegal
efforts by the Korean Government and persons acting on its behalf
to influence American policy and opinion. Press accounts and
public discussion of the Korean scandal, however, have sometimes
made indiscriminate use of the term "lobbying" in connection with
the efforts to influence. The result has been confusion both as to
the definition of lobbying and how to characterize the Korean

activities in question.

LEGAL LOBBYING

Lobbying is the act of a special interest group designed to influ-
ence the decisions of legislators and policjmaakers. Bribery, harass-
ment, intimidation, lavish gift-giving, and covert payments may
have the same objective, but are either illegal or unacceptable to
the public.

Diplomats are official, overt lobbyists for their government. They
are responsible for presenting its views to officials of the United
States. Diplomats lobby and propagandize among not only officials
of the executive branch, but also among members and staff of the
Congress and the public at large. The Foreign Agents Registration
Act states that such activities must be conducted within the scope
of the official duties of diplomats.

Most official contacts by diplomats are with representatives of
the executive branch, to whom they present the views of their
government. In addition, diplomats have various legitimate oppor-
tunities to present those views to others. They may meet with

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430

Members of Congress and staff. They may mail publications to
Congress and the general public. They may talk with the press,
place advertisements with mass media publications, or provide film
for television broadcasting. They may make speeches anywhere in
the United States. They may invite Americans to visit their coun-
try, offer to pay for the trip, and arrange for visitors to meet
Government officials. In all these cases, the identity of the diplo-
mat as a foreign agent is known, and the activities are legal under
American law except that U.S. Government officials may accept
travel expenses from a foreign government only for exchange pro-
grams approved by the State Department.

There is no statute prohibiting diplomats from testifying volun-
tarily before a congressional committee to express the interests of
their government. The Vienna Convention on Diplomatic Privileges
and Immunities (1964), however, exempts diplomats from compul-
sory appearance, and in practice, foreign governments almost
never allow diplomats to testify in Congress.

Most lobbying for foreign governments in the United States is
done through hired agents. Public relations firms, advertising agen-
cies, attorneys, and special consultants are among those employed
extensively by foreign governments. As long as the agents are
properly registered, they may engage in a wide variety of lobbying
practices, including:

(1) Acting as a publicity agent by disseminating propaganda
either in writing, orally, or directly or indirectly through the
mail;

(2) Soliciting and dispensing money for the foreign principal;

(3) Engaging in trade controlled by the foreign principal;

(4) Representing the interests of the foreign principal before
any official of the U.S. Government;

(5) Acting as a political consultant; and

(6) Testifying before congressional committees.

ILLEGAL INFLUENCING

A number of activities are specifically prohibited to officials or
agents of foreign governments, while others are subject to certain
conditions. The Foreign Agents Registration Act expressly prohib-
its the dissemination of political propaganda by persons other than
diplomats or consular officials to any agency or official of the U.S.
Government (including Members of either House of Congress),
unless accompanied by a statement clearly indicating that the
person is a registered foreign agent. A person convicted of willfully
violating the act may be fined up to $10,000 or imprisoned up to 5
years, or both. In addition to criminal penalties, the act authorizes
the Attorney General to initiate proceedings to compel compliance.

It is also a crime for any person other than a diplomatic or
consular official to act in the United States as an agent of a foreign
government without prior notification to the Secretary of State.
The law (18 U.S.C. 951) authorizes 10 years imprisonment or a fine
of $5,000, or both, for violations.

Specific restrictions imposed on foreign agents by the Foreign
Agents Registration Act are:

431

(1) The mails or any other instrumentality of interstate or
foreign commerce may not be used to disseminate propaganda
advocating disorder or the overthrow of the Government;

(2) All political propaganda sent through the mails must be
marked conspicuously with a statement indicating the agent's
registered status;

(3) Books and records must be kept and made available to
enforcement officials and the public;

(4) When a foreign agent testifies before a congressional
committee on behalf of a foreign principal, he must file a copy
of his most recent registration statement as a part of his
testimony;

(5) Foreign agents may not enter into a contingency fee
arrangement with a foreign principal;

(6) Foreign agents may not give a gift of more than $100 in
value to a Senator, Congressman, their families, or staff.

The activities of foreign agents are, of course, also subject to
statutes governing bribery, espionage, sabotage, and subversive ac-
tivities. The law governing bribery (18 U.S.C. 201) prohibits anyone
from offering anything of value to a public official to do anything
in violation of his lawful duties. The penalty is a fine of up to
$20,000 or three times the amount of the bribe, or up to 15 years
imprisonment, or both. Persons convicted are disqualified from
holding public office.

The Federal Election Campaign Act of 1971, as amended, (2
U.S.C. 44 le) prohibits campaign contributions by a foreign princi-
pal. The penalty for a contribution of $1,000 or more is a fine of
$25,000 or three times the amount of the contribution, or 1 year
imprisonment, or both.

Persons who have received training in foreign espionage and
sabotage are required to register with the Attorney General (50
U.S.C. 851-857). The penalty, including for false statements and
omission of material facts, is 5 years imprisonment and a fine of
$10,000. Convicted aliens are subject to deportation.

Harassment and intimidation of residents of the United States
are punishable under various Federal and State laws and constitu-
tional guarantees. The subcommittee found that such activities on
behalf of a foreign government included threatening and carrying
out economic reprisals and threatening the safety of relatives in a
foreign country.

REGISTRATION OF FOREIGN AGENTS

According to U.S. law, all persons working on behalf of foreign
governments in the United States must identify themselves. The
Foreign Agents Registration Act of 1938 requires registration of
persons engaging in ''propaganda activities and other activities for
or on behalf of foreign governments." The purpose is "so that the
Government and people of the United States may be informed of
the identity of such persons and may appraise their statements and
actions in the light of their associations and activities." Such per-
sons must also notify the Department of State that they are foreign
agents. Diplomatic personnel are not required to register under
these statutes, but under article 41 of the Vienna Convention on

432

Diplomatic Relations, they have a "duty not to interfere in the
internal affairs of the [receiving] state/'

A registered foreign agent is permitted to conduct similar activi-
ties because he has satisfied the requirements of the law by
making known his identity as a person working on behalf of cer-
tain interests of a foreign government. His status as a foreign
agent is recorded in the periodic public reports he is required to
file at the Department of Justice.

The conduct of diplomats and registered agents is seen in the
context of their acting openly on behalf of a foreign government
and is judged according to standards of good taste, reasonableness,
and compliance with the laws of the United States. If the U.S.
Government discovers that laws have been violated in the course of
representing a foreign government, it may hold the violators ac-
countable. In the case of diplomats, who are immune from prosecu-
tion, the United States may ask that their government recall them,
or it may declare them persona non grata, compelling their imme-
diate departure from the United States immediately.

A problem the subcommittee encountered was the difficulty, in
some cases, of proving that a person was in fact an agent who
should have registered. Many persons are covert agents. They and
their government may maintain, even in the case of criminal pros-
ecution, that the agents were acting as individuals. While executive
branch reports may show they were acting at the behest of a
foreign government, such reports usually are not admissible as
evidence in court.

It is clear that foreign governments may propagandize extensive-
ly and otherwise lobby Americans through hired agents, provided
the agents are identified according to law. The act of registering as
a foreign agent is an explicit declaration that an agency does exist.
The statutory registration requirement, however, is not limited to
those agency relationships established specifically by a contract
between the agent and the foreign principal. It applies to any
situation in which an agency can in fact be said to exist.

CONCLUSIONS

The degree to which Americans are influenced by foreign agents
is a function of the agents' persuasiveness and the judgment of
individual Americans who are targets of influence activities. Feder-
al officials, including Members of Congress and staff, are prohibited
from accepting gifts of more than $100 in value from foreign
agents. Federal officials may accept payment from foreign govern-
ments to visit foreign countries if the proposed trip is among the
cultural exchange programs approved by the Secretary of State (22
U.S.C. 2458). Private citizens are not bound by this statute, but the
subcommittee considers the statute to be an appropriate guideline
for private citizens to consider when deciding whether to accept
travel expenses from a foreign government.

Within the bounds of the law, reasonableness, and good taste,
foreign governments should be encouraged to make their views
known openly to Americans. Accordingly, diplomats and other for-
eign agents should be encouraged to appear as witnesses before
congressional committees.

433

It is incumbent upon U.S. Government officials, especially in law
enforcement and foreign relations, to monitor closely the activities
of unregistered persons who intensively promote the interests of
foreign governments. If intelligence or other information suggests
an agency relationship with a foreign government, appropriate
officials should investigate. The executive branch showed little con-
cern in the past about such activities by allied governments. The
unfortunate result was that illegal covert activities of influence on
behalf of the Republic of Korea proceeded unchecked until they
reached the proportions of major scandals.

In reply to a request by the subcommittee chairman for a state-
ment delineating lobbying which is proper, improper, legal, and
illegal, the Department of State wrote that "The Department has
not prepared specific guidelines for distribution to foreign govern-
ments which would set forth the acceptable limits of such activity
in this country." The letter asserted that this is "a matter which
the Department believes should be looked into under the circum-
stances of the particular case."

The following is the correspondence between the subcommittee
chairman and the Department of State:

Subcommittee on International Organizations,

June 12, 1978.
Hon. Cyrus R. Vance,
Secretary of State,
Washington, D.C.

Dear Mr. Secretary: One of the most difficult questions we have faced during
the course of our investigation is the extent to which foreign governments can
engage in lobbying practices, properly and legally, in a host country. In that regard,
we request that the Department of State prepare a statement, for use by the
Investigation of Korean-American Relations, on the subject of lobbying of Ameri-
cans by representatives of foreign governments.

Such a statement would be very useful to this subcommittee as it seeks to reach
conclusions for this investigation. We hope to be able to make objective distinc-
tions— both in general and specifically insofar as possible — between lobbying which
is proper and improper, legal and illegal.

From our review of the files of the Department, we have found a document that
suggests that the Department may have been contemplating preparing guidelines on
this subject for distribution to several Embassies including the Korean Embassy.
The document is dated October 16, 1970, from Ambassador William Porter to
Deputy Assistant Secretary Winthrop Brown.

I would be most grateful for your favorable consideration of this request. If
possible, we would like to have the completed statement by August 1st. The investi-
gative staff is available to consult with officers of the Department regarding further
details about the request. For that purpose, I suggest you have someone contact
either Bob Boettcher or Michael Hershman at 225-7222.
Sincerely yours,

Donald M. Eraser, Chairman.

Department of State,
Washington, D.C, September 11, 1978.

Hon. Donald M. Fraser,

Chairman, Subcommittee on International Organizations,

Committee on International Relations, House of Representatives.

Dear Mr. Chairman: I am writing in response to your letter of June 12 to
Secretary Vance requesting a statement from the Department regarding lobbying of
Americans by representatives of foreign governments. The Department has not
prepared specific guidelines for distribution to foreign governments which would set
forth the acceptable limits of such activity in this country. The paper dated October
16, 1970, which you identify in your letter, was never distributed to foreign embas-
sies. However, the following represents the Department's views on the matter.

434

The Department adheres to the principles contained in the Vienna Convention on
Diplomatic Relations of 1961, generally a codification of customary international
law and practice, respecting the extent to which foreign diplomatic representatives
are permitted to "lobby" American concerns. After due consideration, we have been
unable to significantly improve upon Article 41 of that Convention which provides
that a diplomatic agent has a "duty not to interfere in the internal affairs of the
[receiving] State". A large part of this restriction relates to involvement of a
diplomat in' domestic political activities, such as participation in political campsdgns,
but would also extend to other activities constituting inappropriate intervention
into domestic affairs.

In view of the fact that Article 41 of the Vienna Convention specifically imposes a
duty on all persons enjoying privileges and immunities to respect the laws and
regulations of the host country, quite apart from the injunction against interfering
in internal affairs, we would consider any lobbying by foreign diplomats which
violates State or Federal laws or regulations as a violation of the Convention.

While the Department regards this responsibility as a serious one and expects
foreign diplomatic agents to refrain from activity which would bring them into
potential infringement thereof, the Department realistically expects that certain
official activities of diplomats will bring them into contact with persons on the
domestic scene who may be involved, directly or indirectly, in political activity or
with events of domestic political interest. Generally, the Department would not
regard such contact per se as a violation of the diplomat's responsibility. In this
regard, it is noted that Article 3 of the Vienna Convention provides that the
fiinctions of a diplomatic agent include, inter alia:

"(d) ascertaining by all lawful means conditions and developments in the
receiving State, and reporting thereon to the Government of the sending State;"
and

"(e) promoting friendly relations between the sending State and the receiving
State, and developing their economic, cultural and scientific relations."

Thus, it can be seen that any absolute bar against a diplomat's contact with
domestic political figures or political events might well result in the diplomat's
inability to carry out his authorized functions in an effective way.

Whether or not an individual diplomat or group of diplomats has exceeded appro-
priate involvement in affairs affecting domestic politics is a matter which the
Department believes should be looked into under the circumstances of the particu-
lar case.

It is hoped that the information contained in this letter will be of assistance. If
further inquires arise, they may be directed to the Office of the Legal Adviser,
telephone 632-0768.
Sincerely,

Douglas J. Bennet, Jr.,
Assis^nt Secretary for Congressional Relations.

PART F

ADDITIONAL VIEWS

Additional views of the minority members with respect to the
report of the investigation of Korean- American relations.

35-508 O - 78 - 29

Additional Views by Hon. Edward J. Derwinski and Hon.

WiLUAM F. GOODUNG

The Minority had serious doubts about this investigation when it
was first proposed in 1977. The questionable activities carried out
by South Korea in the United States— which were the inspiration
for the investigation— had for the most part ceased, as this report
documents, by the time the inquiry got underway in April 1977.
We believed in the beginning that there were several other serious
problems to which the Subcommittee could have turned its ener-
gies rather than to add to its burdens an investigation already
being carried out, or contemplated, by the House and Senate ethics
committees, as well as by the several agencies of the Executive
Branch.

Nevertheless, once the investigation started, the Minority Mem-
bers gave it full cooperation. It was our aim, among other things,
to help provide objectivity and perspective to the investigation
itself and to the final report. We believe we have made a positive
contribution in this regard.

This report describes in detail the nature and extent of South
Korea's actions. It provides valuable insights into questions often
treated superficially by the media and sheds light on some hereto-
fore unexamined areas. The report thereby contributes to a clearer
understanding of a complex Korean-American relationship — a com-
prehension of which has often been absent or simply obscured by
rhetoric.

All this notwithstanding, the Members of the Minority have
believed that, from the start, the scope of the investigation was far
too broad; indeed, the Subcommittee's mandate itself encompassed
too much. Thus, a highly diligent staff attempted to accomplish
more than the time and resources could allow. Qualified and dedi-
cated, the staff members labored extremely hard throughout the
investigative stage, and their efforts to produce a detailed and
comprehensive final report were exceptional.

By the same token, the volume of information acquired in the
course of the inquiry was so great that the Members of the Sub-
committee obviously could not familiarize themselves with it all.
Having worked long and diligently with the Chairman of this
Subcommitee, the Members of the Minority have signed this report
in the same spirit of cooperation which has characterized our col-
laboration throughout the investigation. Our signatures, however,
are not an imprimatur for all the complex details uncovered, or all
the conclusions and recommendations arrived at, by the large and
industrious staff.

There were, moreover, some differences of preception, interpreta-
tion and emphasis between the Majority and Minority Members.
These differences, though not many, mitigate against a blanket
endorsement of the report.

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438

This investigation found its orgins, of course, in South Korean
wrongdoing. With respect to these misdeeds, the Minority endorses
the view of Harold Brown, Secretary of Defense, when he spoke of
allegations of South Korean bribery and improper influence:

We condemn such actions as a serious misinterpretation of our governmental
process and of the mores of the American people. At the same time, we must not let
the Tongsun Park affair obscure our basic national interests in Korea.

To look at Korea solely in terms of this scandal without regard to our security
interests and responsibilities would endanger not only South Korea and its people,
but the stability of northeast Asia and the security of this country as well. (As
quoted in the New York Times, Feb. 23, 1978.)

This statement offers a perspective which the Minority believes
should be emphasized. Another is one arrived at by The Washing-
ton Post in a perceptive editorial on June 14, 1978. The editorial
said in part:

Whatever South Korean officials did on the Hill back in the early 1970's, they
were surely motivated only by a desire to serve their country. It is not hard to
imagine that the Koreans, apprehensive about what American policy might be after
Vietnam, thought it might be prudent to take out a little insurance on Capitol Hill.
They could well have thought that they would not be the first to act in this way.

The misdeeds detailed by this report can in no way be condoned,
but the basic interests of the United States must nevertheless
remain paramount in any assessment of these activities. Moreover,
the enormous apprehension of the Koreans about their national
survival must be understood completely before one can judge the
''Korean scandal" properly.

The point made at the end of The Washington Post editorial is
also particularly relevant in viewing the Korean problem. There
are, and have been for decades, other operations of influence in
this country — some conducted by allies, as in the case of the Repub-
lic of Korea, some by more-or-less neutrals or occasional friends,
and some by those who have acted consistently as virtual enemies.
During hearings conducted by the subcommittee the word "subver-
sion" was used more than once to characterize South Korea's at-
tempts to better her position vis-a-vis the U.S. Congress and other
agencies of power in America. The media, of course, seized upon
that dramatic word for its headlines. There has been no evidence,
however, to determine that the ROK ever attempted "to overthrow
or destroy" or "to overturn from beneath," which are normal defi-
nitions of the word "subversion."

Indeed, the whole point of the Korean excesses would be missed
if they are not viewed in that light. The Koreans have done some
bad things; of that there is no doubt. They have misunderstood our
mores, as Secretary Brown has observed, and they have misused
our institutions. Nevertheless, as this report clearly documents,
they were trying, however misdirected their operations, to restore
and strengthen long-established ties with the U.S. They were not
even remotely trying to overturn or destroy our system of govern-
ment on which they depend so much. In comparsion, the Soviet
Union, for example, has been sponsoring agents of influence in this
country since before the Republic of Korea existed. That is the
kind of influence and the kind of activity which can correctly be
called "subversive."

The Minority also believes that the course of the investigation
was sometimes shaped by preconceptions. The goals were optimistic

439

but evidence did not always materialize in the precise form to
support the objectives.

The Minority also notes the obvious— that the matter of ques-
tionable corporate payments to officials abroad is not limited to
South Korea. It is a way of life in a number of areas of the world.

There were also mechanical problems which precluded an un-
qualified acceptance of the report by the Minority. With the ad-
journment of Congress on October 15, 1978, most of the Members of
the Subcommittee left Washington before a completed draft of the
report could be reviewed. We, therefore, were unable to read the
final report in its entirety.

Despite these real reservations and concerns over various aspects
of this report, the Minority wishes to assert its particular support
of the finding of the section on the Moon organization. We believe
that no Member of the Subcommittee was in any way interested in
interfering with the religious rights of Sun Myung Moon or his
followers. There was complete agreement, nonetheless, that the
political and commercial activities of the Moon organizational com-
plex may have violated U.S. laws and deserve to be investigated
thoroughly. For several years a few states in the U.S. have at-
tempted to cope with the Moon organization despite inadequate
resources and without the coordination that only the Federal Gov-
ernment can provide. As this report shows, the Moon operation is
national — indeed international — in scope. It has long deserved the
close scrutiny of the Federal Government, and it is difficult to
understand why the appropriate agencies of the Executive Branch
have not long since taken action against those activities of the
Moon Organization which are illegal.

That South Korea was particularly bold and active in its oper-
ations contributed to the shock when its activities were eventually
publicized. Whatever caused the South Koreans to act as they did
and what American officials contributed to that process are well
set forth in this document. One may differ in the interpretation of
the events as spelled out in this report, but it is obvious there is
much to be learned from this investigation.

Finally, the Minority believes that most of the problems dis-
cussed in this final document have already been solved. Those that
remain can now be approached with the valuable perspective
gained from this inquiry. The Minority Members trust that the
Korean- American interrelationships will now have reached a point
of mutual understanding and that henceforth relations will only
continue to improve.

Edward J. Derwinski.
William F. Goodung.

PART G

GLOSSARY

This glossary contains names and descriptions of persons {ind
organizations mentioned prominently in the report.

I. Organizations and Terms

Asian Peoples' Anti-Communist League— Freedom Center (APACL-FC)— Project of
the South Korean (jovemment for which Kim Jong Pil attempted to raise fimds in
the United States through the Korean Cultural and Freedom Foundation.

Blue House — Presidential Mansion of the Republic of Korea.

Democratic People's Republic of Korea (DPRK) — North Korea.

Democratic Republican Party (DRP) — Ruling political party in South Korea since
1963; organized by Kim Jong Pil in 1962.

Diplomat National Bank (DA®>— Washington, D.C. bank founded by Charles Kim
in 1975; stated objective was to serve the Asian-American community; came under
investigation as a result of disguised stock purchases by Tongsun Park and the
Moon Organization.

Dong-A Ilbo — A major Korean-language newspaper in Seoul.

Freedom Leadership Foundation (FLF) — A political arm of the Moon Organiza-
tion; founded by Sun Myung Moon in 1969.

Guam doctrine — President Richard M. Nixon's new Asian policy, also called the
Nixon doctrine, enunciated in Guam, July 25, 1969.

Korean American Political Association (KAPA) — Established in San Francisco in
1971 for the purpose of coordinating political activities by Korean- Americans
throughout the United States; financed primarily by Unification Church leaders.

Korean Broadcast System (KBS) — ROK Government-owned and operated broad-
cast system in Korea.

Korean Central Intelligence Agency ^C/A>— Intelligence oi^gan of the ROK Gov-
ernment, established in 1961 by Kim Jong Pil; has responsibility for both overseas
intelligence gathering and internal security; harassed members of the Korean com-
munity in the United States and participated in the campaign to influence U.S.
policy and pubhc opinion in favor of the ROK Government position.

Korean Cultural and Freedom Foundation (KCFF) — Organized in 1964 by Pak Bo
Hi to promote Korean-American relations through cultural and educational pro-
grams; was a component of the Moon Organization and was used by the ROK
Government to promote political objectives.

Korean Information Office (KIO) — Official ROK Government information office in
Washington, D.C; 1 of 44 such offices around the world operated by the ROK
Ministry of Culture and Information.

Little Angels — A singing and dancing troupe of young Korean girls founded by
Sun Myung Moon; used to propagandize for both the Moon Organization and the
ROK Grovemment.

Moon Organization — Term used in this report to describe the international net-
work of economic, political, religious, cultural, media, and other organizations sub-
ject to the control and direction of Sun Myung Moon and his principal aides.

Radio of Free Asia (ROFA) — Project of the Korean Cultural and Freedom Founda-
tion for broadcasting anti-Communist propaganda in Korea using facilities provided
free of charge by the Korean Government.

Research Institute on Korean Affairs (RIKA) — Academic research institute estab-
lished in the fall of 1970 by Gen. Kang Young Hoon, (ret.) and funded covertly by
the KCIA until it closed in 1976; sponsored academic conferences and published an
academic journal on Korea.

Saemaul Undorg C'New Village Movement")— ROK Government program begun
in the early 1970's which encouraged self-help efforts by the rural population to
improve living conditions through small-scale community public works.

Tong II Industries Co. Ltd.— A. component of the Moon Organization; an industrial
corporation in Korea engaged in machinery production, including defense contract-
ing; manufactures parts for several weapons systems and in 1977 attempted to
obtain permission from an American company to export M-16 rifles.

Unification Church (UC)—A religious component of the Moon Organization.

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444

Yushin Constitution — Amendments to the ROK Constitution announced in Octo-
ber 1972 which gave unlimited powers to President Park Chung Hee.

Korean Traders Scholarship Foundation (KTSF)/Korean Traders Association
(KTA)—KTA, through KTSF, made contributions to several U.S. universities; mem-
bership of KTA is drawn from leading Korean export firms; ostensibly a private
organization; the subcommittee received testimony and saw documentary evidence
indicating that the KTA made donations at the direction of the ROK Government.

H^on— Currency of the Republic of Korea. The officially established exchange rate:
1964 to December 1965, 255 won to one dollar; 1965 to December 1972, 270 won to
one dollar; 1972 to December 1974, 400 won to one dollar; 1974 to 1978, 484 won to
one dollar.

Republic of Korea (ROK)— South Korea.

II. Names

[In the list of names below, American names appear in their usual order, family
name last. Similarly, Korean names appear in their usual order, with the family name
first. The exceptions are those Koreans who are well-known in the United States;
their family names appear last, e.g., Tongsun Park. All names are listed in alphabeti-
cal order by family name.]

Michael Adler — AID Mission Director and Counselor for Economic Affairs, U.S.
Embassy, Seoul, 1971-75; testified before the subcommittee in August 1978.

Carl Albert — Speaker of the U.S. House of Representatives, 1971-76.

Samuel Berger — U.S. Ambassador to Korea, 1961-64; Deputy Assistant Secretary
of State for East Asian and Pacific Affairs, 1965-68.

Joel Bernstein— AID Mission Director, Seoul, 1964-67; testified before the subcom-
mittee in August 1978.

Winthrop Brown — U.S. Ambassador to Korea, 1964-67; Deputy Assistant Secre-
tary of State for East Asian and Pacific Affairs, 1969-72.

Arleigh Burke, Admiral (ret.) — Original chairman of the Board of the Korean
Cultural and Freedom Foundation, 1964-65.

Chang Do Won, Lt. Gen. (ret.) — Professor of general studies at Western Michigan
University; Army Chief of Staff at the time of the 1961 military coup.

Chang Key Young — Vice Prime Minister and Minister of the Economic Planning
Board of the ROK, 1964-67; vice chairman of the South-North Coordinating Com-
mittee, 1972-73; Member of the National Assembly, 1973-75.

Chang Myon — ROK Prime Minister, April 1960-May 1961; o^^erthrown by the
military coup in 1961.

Choi Cheyung — Korean businessman in New York City who received money from
a KCIA official; part was used to purchase stock in the Diplomat National Bank.

Choi Hong Tae— KCIA official at the ROK Embassy; responsible for the U.S.
executive branch.

Choi Kyu Ha — ROK Minister of Foreign Affairs, 1967-71; special assistant to
President Park for foreign affairs, 1971; prime minister since' 1975.

Choi Sang Ik — Early follower of Sun Myung Moon; helped establish Moon's move-
ment in Japan and the United States; early financial supporter and official in the
Korean American Political Association.

Chung II Kwon — Former army general who served as ROK Ambassador to the
United States, 1960-63; Prime Minister, 1964-70; Speaker of the National Assembly
since 1973.

John Coulter — Retired U.S. Army general; chairman of the board of the Korean
Cultural and Freedom Foundation, 1966.

William Cur^m— Retired military officer; officer of the Korean Cultural and
Freedom Foundation, 1964-65.

Daniel Fefferman — Secretary-General of the Freedom Leadership Foundation; tes-
tified before the subcommittee in July 1977.

(Cornelius Gallagher— Member of the U.S. House of Representatives (D.-N.J.),
(1959-72).

Marshall Green— Assistant Secretary of State for East Asian and Pacific Affairs,
1969-73; testified before the subcommittee in March 1978.

Philip Habib—\J.S. Ambassador to Korea, 1971-74; Assistant Secretary of State
for East Asian and Pacific Affairs, 1974-76; Under Secretary of State for Political
Affairs, 1976-78.

445

Hahn Kwang Neun — Former publisher of the Hankook Shinmoon in Washington,
D.C.; identified as having received funds from the KCIA for coordinating pro-Park
Government Korean-language media in the United States; left the United States in
November 1977.

Alexander Haig — General, U.S. Army; Commander of NATO and U.S. Forces in
Europe since 1974; White House Chief of Staff, 1973-74; Deputy Assistant to the
President for National Security Affairs, 1969-74.

Han Byung Ki — Son-in-law of President Park Chung Hee; Deputy Ambassador at
the ROK Observer Mission to the United Nations, 1975-76; ROK Ambassador to
Canada since 1977.

Han Sang Gil — Former ROK Embassy official; ROK Army officer; now aide to
Sun Myung Moon.

Richard Hanna— Member of the U.S. House of Representatives (D.-Calif.) 1963-74;
convicted in 1978 after pleading guilty to charges relating to acceptance of pay-
ments from Tongsun Park.

James C. Hise — Former Chief of Registration Section of the Department of Jus-
tice; testified before the subcommittee in March 1978.

U. Alexis Johnson— Under Secretary of State for Political Affairs, 1969-72.

Anthony Jurich — Former special assistant to Ambassador David Kennedy; partici-
pated in textile negotiations with South Korea.

Hancho Kim — Korean-American businessman and a member of the Board of
Trustees of American University; convicted in 1978 of conspiracy with the KCIA to
bribe U.S. officials.

Kim Hyung Wook — A member of the group which carried out the military coup in
Korea in 1961; director of the KCIA, 1963-69; living in self-imposed exile in the
United States since 1973; testified before the subcommittee in June 1977 and in July
and August 1978.

Kim II Sung — Head of state of the Democratic People's Republic of Korea (North
Korea).

Kim Jong Pil — A principal participant in the 1961 military coup; founder and
first director of the KCIA: organizer and first chairman of the Democratic Republic
Party; Prime Minister, 1971-75.

Kim Kwang — Korean national who in 1970-71 was an aide to Congressman Rich-
ard Hanna and Congressman Cornelius Gallagher; identified by U.S. executive
branch agencies as connected with the KCIA.

Kim Un Yong (Mickey Kim) — Former aide to Kim Jong Pil and counselor at the
ROK Embassy; later became an aide to Park Choung Kyu; head of the Korean Tae
Kwon Do Association as of 1978.

Kim Sang In (Steve Kim J — Aide to Kim Jong Pil; KCIA official; early follower of
Sun Myung Moon; associate of Pak Bo Hi and Tongsun Park.

Kim Dong Jo— ROK Ambassador to the United States, 1967-73; Minister of For-
eign Affairs, 1973-75; Special Assistant to President Park, 1975-78; allegedly made
payments to Members of the U.S. Congress and was the subject of diplomatic
maneuvers in 1977-78 to obtain his return to the United States during the investi-
gation by the House Committee on Standards of Official Conduct.

Kim Dong Sung — Former ROK Minister of Public Information; Operations Direc-
tor of Radio of Free Asia (ROFA), 1966-67.

Kim Sang Keun — KCIA official at ROK Embassy from 1970 until defecting in
November 1976; testified before the subcommittee in June 1978.

Kim Seong Jin — Adviser to President Park, 1970; Minister of Culture and Infor-
mation since 1975.

Kim Song Kon (S. K Kim) — Prominent Korean businessman; finance chairman of
the Democratic Republican Party from the mid-1960's until 1971; Member of the
National Assembly, 1963-71.

Kang Kyung Koo — Education attache at the ROK Embassy from 1970 until resign-
ing in 1976; testified before the subcommittee in June 1978.

'Kang Young Hoon — Retired ROK Army general; director of the Research Insti-
tute on Korean Affairs, Silver Spring, Md., 1970-76; returned to Korea in December
1976.

Charles Kim (Kim Chang Won) — Organizer and first chairman of the board of the
Diplomat National Bank of Washington, D.C.; helped make arrangements for stock
purchases by Tongsun Park and followers of Sun Myung Moon.

446

Kim Chong Ybm— Chief of the Blue House Secretariat since 1973.

Kim Dae Jung— Former ROK National Assembly Member who ran against Presi-
dent Park as the New Democratic Party presidential candidate in 1971; kidnaped in
Tokyo by the KCIA in August 1973 and taken back to Korea; remained imprisoned
as of October 1978.

Kim Yong Shik—ROK Minister of Foreign Affairs, 1971-73; Ambassador to the
United Kingdom, 1^74-77; Ambassador to the United States since 1977.

Kim Yung Hwan— Former ROK Air Force general; KCIA station chief in Wash-
ington, 1974-76.

Henry A. Kissinger — Assistant to the President for National Security Affairs,
1969-75; Secretary of State, 1973-77; testified before the subcommittee in April 1978.

Koh Pum Jun (P. J. Koh) — Secretary General of the Korean Traders Scholarship
Foundation (KTSF); participated in Korean grants to U.S. academic institutions.

Melvin Laird— U.S. Secretary of Defense, 1969-72.

Judith LeJeune— Employee of the Korean Cultural and Freedom Foundation;
secretary to Pak Bo Hi; Diplomat National Bank investor.

Lee Hu Rak—T>\rector of the KCIA, 1970-73; assistant military attache at ROK
Embassy during the 1950's; Chief of the Blue House Secretariat, 1963-69; Co-Chair-
man of the South-North Coordinating Committee during discussions between North
and South Korea in 1972-73.

Lee Jai Hyon — Chief Information and Cultural Attache and Director of the
Korean Information Office in the United States, ROK Embassy, 1970-73, when he
resigned; associate professor of journalism at Western Illinois University since 1974;
testified before the subcommittee in June 1975 2ind June 1976.

Lee Kwang Jae — Former KBS announcer and Voice of America employee in
Washington; identified as having received funds from the KCIA for his Korean-
language media activities in the United States.

Robert Mardian — Assistant Attorney General, Internal Security, 1969-73.

Lawrence Mays — International Chairman of Radio of Free Asia, 1966.

William McDonnell — Former supervisor. Domestic Intelligence Division, Nation-
alities Unit, FBI; testified before the subcommittee in March 1978.

John M. Mitchell— Attorney General, 1969-72; testified before the subcommittee
in March 1978.

Sun Myung Moon — Head of the Moon Organization; founder of the Unification
Church; controls numerous business enterprises in Korea and the United States,
including Tong II Enterprises and News World (a New York-based newspaper), and
other organizations including the Korean Cultural and Freedom Foundation, the
Little Angels, and the Freedom Leadership Foundation.

Nam Duck Woo — ROK Minister of Finance, 1969; Deputy Prime Minister and
Minister of the Economic Planning Board (EPB) since 1974.

John Nidecker — White House aide during Nixon Euid Ford administrations; testi-
fied before the subcommittee in June 1978.

Pak Bo Hi — Special assistant to Sun Myung Moon; assistant military attache,
ROK Embassy, 1961-64; organized the Korean Cultural emd Freedom Foundation;
testified before the subcommittee in 1978 on his political and financial activities.

Park Choong Hoon — Chairmgm of the Korean Traders Association (KTA) and
former ROK Minister of Commerce and Industry.

Park Chong Kyu — Head of the ROK Presidential Protective Force until his resig-
nation in 1974; a principal participant in the 1961 military coup.

Park Chung Hee — President of the Republic of Korea since 1963.

Tongsun Park — Wealthy businessman and major figure in the investigations of
Korean influence activities; indicted on 36 counte in 1977; granted immunity from
prosecution in exchange for cooperating with the investigations.

Otto Passman — Member of the U.S. House of Representatives (D.-La.), 1947-76;
indicted in 1978 on charges relating to acceptance of pajmients from Tongsun Park.

William Porter — U.S. Ambassador to Korea, 1967-71; Under Secretary of State for
Political Affairs, 1973-74.

Donald Ranard — Director of the Office of Korean Affairs, Department of State,
1970-74; testified before the subcommittee in March 1976 and 1978.

Syngman Rhee — President of the Republic of Korea, 1948-60; forced to resign in
1960.

447

William P. Rogers—Secretary of State, 1969-73.

Row Chin Hwan — ROK National Assembly Member and former head of the
Washington, D.C. Korean residents association.

Neil Sa/onen— President of the Unification Church of the United States; investor
in the Diplomat National Bank.

Richard Sneider— U.S. Ambassador to Korea, 1974-78.

Sohn Ho Young — Former KCIA official; resigned in 1977 and sought protection of
the U.S. Government; testified before the subcommittee in November 1977.

Suzi Park Thomson — Former aide to several Members of the House of Representa-
tives; identified by U.S. executive branch agencies as connected with the KCIA.

Cyrus R. Vance — Special emissary of President Johnson to Korea in 1968 follow-
ing raid on the Blue House and capture of the U.S.S. Pueblo; Secretary of State
since 1977.

Yang Doo Won (Lee Sang Ho)— KCIA station chief at the ROK Embassy, 1972-74;
returned to Korea at the request of the State Department; became KCIA Deputy
Director for Security in Seoul.

Yang You Chan — ROK Ambassador to the United States under the Rhee Govern-
ment; early organizer of the Korean Cultural and Freedom Foundation.

UNIVERSITY OF FLORIDA

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3 1262 09119 3358

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